The company said the project's potential was "not commercially competitive" compared with other exploration opportunities it was pursuing.
It comes just two months after Australian regulators approved the company's environmental plan to drill for oil in the Bight, an area of ocean thought to be rich in oil and gas reserves.
"However, Equinor has decided to discontinue its plans to drill the Stromlo-1 exploration well, as the opportunity is not commercially competitive," Equinor Australia manager Jone Stangeland said in a statement.
London-based BP scrapped its plans to drill the Bight in 2016 and US energy giant Chevron did the same the following year.
Australian Resources Minister Keith Pitt said the latest decision was "extremely disappointing", particularly for South Australia state where authorities had hoped the project would bring much-needed jobs.
The move was celebrated by conservation groups that had campaigned to protect the Bight from oil drilling, saying it would damage the unique ecosystem of an area sometimes called 'Australia's Galapagos'.
Australian Greens party Senator Sarah Hanson-Young called it a "huge win" for the environment, as well as South Australia's tourism and fisheries industries.
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