A “specific threat of an Islamist attack” was identified by state security sources, they said in a statement.
German police urged people planning to attend to stay at home.
The parade – a well-known regional attraction – was cancelled only 90 minutes before it was due to start.
“Many people arriving at the train station were already dressed up and very disappointed – but we didn’t want to take any risks,” police spokesman Thomas Geese was quoted as saying.
Braunschweig’s Carnival parade reportedly draws around 250,000 visitors each year. More than 4,000 participants in fancy dress march down a 4-mile route through the city.
The decision to call it off was taken by Mayor Ulrich Markurth and the parade’s marshal, Gerhard Baller.
“This is a sad day for our city,” Mayor Ulrich Markurth told public broadcaster NDR.
“The assessment of the police however left us with no other choice.”
Large carnival parades and street parties are held every year in the week before Lent in Catholic regions of Germany.
The cancellation comes hours after Danish police shot dead a man they believe was behind two deadly attacks earlier in Copenhagen, though one German police chief was quoted as saying there was no link.
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