The Chancellor said that Germany is suspending the project in light of Russia's incursion into Ukraine.
A subsidiary of Russia's state-owned Gazprom is the owner of the undersea gas line. Berlin was reluctant to impose sanctions that would affect Nord Stream 2.
In light of recent events, we must also reexamine the situation with regard to Nord Stream 2.
He said he asked the German economy ministry to withdraw a binding opinion that stated there were no security-of-supply threats.
This is a necessary administrative step so that no certification can be made of theNord Stream 2.
The certification process was stopped by the economy ministry.
It was a surprise move from Scholz, who had at times avoided even mentioning the pipeline by name in recent days, and came after Russian President Vladimir Putin ordered troops into the self-declared "people's republics" of Donetsk and Luhansk in eastern Ukraine.
The 10 billion dollar project has yet to start operating despite being completed in September. It was feared that Russia would be able to shut off gas transport via existing land lines, costing Ukraine billions of dollars in transit fees.
The decision is morally, politically and practically correct according to the Foreign Minister. Germany's move proves that.
At a press conference with Irish Prime Minister Miche Martin, Scholz said that Russia's move to recognize the areas as independent was a serious violation of international law.
The economy ministry, led by the Greens, would draw up a new supply security report, taking into account recent developments.
The certification can't take place now, but it might get licensed at a later date, he said. The government could be vulnerable to lawsuits.
The spokesman for the Prime Minister of the U.K. welcomed the move. Being dependent on Russian oil is not beneficial to Europe.
The decision comes as Europeans grapple with record-high power bills, caused by a gas supply shortage. Russian gas accounted for 42% of EU imports via pipelines last year.
The deputy chair of Russia's security council reacted to the decision by pointing out the EU's dependency.
Putin said before the announcement that he had no intention of cutting exports to Europe.
A spokesman for Nord Stream 2 wouldn't comment.
Laurenz Gehrke, Esther Webber and America Hernandez contributed reporting.