Malaysia had already announced Barack Obama would be replaced by Secretary of State John Kerry for the visit next week.
The US government has partially shut down after the two houses of Congress failed to agree a new budget.
More than 700,000 federal employees face unpaid leave, and national parks, museums and many buildings are closed.
Barack Obama earlier vowed not to allow Republicans to undermine his signature healthcare legislation as a condition to restart the US government.
“They demanded ransom,” Barack Obama said.
Barack Obama had been scheduled to begin his four-nation Asian trip on Saturday to boost economic ties.
Earlier, the office of Malaysian Prime Minister Najib Razak said Barack Obama had called him on Wednesday to inform him that Mr Kerry would address an entrepreneurship conference in Kuala Lumpur on October 11 in his place.
Barack Obama has been forced to call off trips to Asia before.
In 2010, a vote on health care and the Gulf of Mexico oil spill forced separate cancellations in March and June, though he did make it to India, South Korea, Japan and Indonesia in November of that year.
The US government ceased operations deemed non-essential at midnight on Tuesday, when the previous budget expired.
National parks and Washington’s Smithsonian museums are closed, pension and veterans’ benefit cheques will be delayed, and visa and passport applications will go unprocessed.
However, members of the military will be paid.
One group of elderly military veterans managed to bypass the shutdown when the WWII Memorial in Washington DC – that they had travelled from Mississippi to see – was opened for them.
President Barack Obama has blamed conservative Republicans in the House of Representatives for the government shutdown, saying “one faction of one party” was responsible because “they didn’t like one law”.
“They’ve shut down the government over an ideological crusade to deny affordable health insurance to millions of Americans,” the president said.
The White House rejected a Republican plan to fund only a few portions of the government – national parks, veterans’ programmes and the budget of the District of Columbia.
The Republicans have called for more negotiations.
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