The Saudi Arabian Defence Ministry has reportedly halted $3bn worth of funding in military aid to Lebanon.
The decision follows Lebanon's failure to condemn a recent terrorist attack on the Saudi Arabian embassy in Tehran, Iran, according to the official Saudi Press Agency.
Uncertainty about the prevention of misuse of newly acquired weapons by Hezbollah in supporting Syria's president Bashar al-Assad's government is also reported to have contributed to the decision.
The Saudi funding was to assist the Lebanese armed forces in purchasing French weapons to meet increasing security challenges.
The Middle-East nation has additionally called off another $1bn in assistance to the Lebanese police force.
Lebanon received the first batch of arms, which included armoured vehicles, attack helicopters, and artillery following requests to support its military modernisation programme.
The Asian nation's 60,000-strong military is still considered ill-equipped.
The US, which has provided around $1.4bn of military funding since 2005, revealed plans to continue funding Lebanon.
US spokesman Mark Toner was quoted by CNS news as saying: "We're going to continue our support to the Lebanese Armed Forces (LAF) and Internal Security Forces (ISF) with one objective in mind, which is to ensure that the army continues its role as a legitimate protector of Lebanon's borders, people, including from extremist threats."