Nurmagomedov, 28, was taken to a hospital for medical complications suffered during his weight cut. The 155-pound title fight was supposed to co-headline UFC 209 on Saturday at T-Mobile Arena.
"UFC lightweight Khabib Nurmagomedov was transported to Sunrise Hospital & Medical Center Thursday evening due to weight management medical issues," a UFC statement read. "He was treated and has been discharged."
The statement went on to say the bout was canceled based on a doctor's recommendation.
"It's obviously a huge blow," UFC president Dana White said.
The UFC hasn't decided whether to reschedule the bout later in the year, White added.
It was the third time a matchup between the two has been canceled, though it has never happened this late. They were scheduled to fight in 2015 and 2016, but both times the matchup fell apart because of injuries. Nurmagomedov has won all eight of his UFC bouts, but the Dagestan-born Russian missed two full years of competition before April 2016 due to a persistent knee injury.
Ferguson, who has won nine straight fights, came in at 154.5 pounds during Friday's weigh-in. The fight had not yet been called off at the time Ferguson stepped on the scale.
Ferguson offered a bit of foreshadowing on Thursday. During a stare-down with Nurmagomedov at a media function, Ferguson looked in the Dagestani's direction and said, "Have fun with that weight cut."
The cancellation is a massive blow to UFC 209, which is headlined by a welterweight title fight between Tyron Woodley and Stephen Thompson. Woodley and Thompson each made weight for their title rematch, at 170 and 169 pounds, respectively.
Nurmagomedov (24-0) and Ferguson (22-3) had promoted their fight as the true lightweight championship bout, despite that title being officially held by Conor McGregor.
Ferguson tweeted condolences at Nurmagomedov on Friday morning.
Michael Johnson, a lightweight contender who lost to Nurmagomedov last November, said he had tentatively agreed on Friday to replace Nurmagomedov against Ferguson. On Twitter, Johnson claimed Ferguson then turned down the replacement fight, which would have been a rematch of Johnson's decision victory over Ferguson in May 2012.
I was ready and willing!! To make that title weight for last minute. Unfortunately @TonyFergusonXT declined it. Catch ya around next time!— Michael Johnson (@FollowTheMenace) March 3, 2017
Ferguson considered a substitute opponent, but he told Fox Sports 1 that the UFC wanted to cut his pay for the replacement bout, and it would not have been for an interim title. Ferguson acknowledged that he barely made weight himself, and he empathized with Nurmagomedov.
"I thought it was a nightmare, man," Ferguson said of his reaction to the bout's cancellation. "Something worse than El Cucuy. It was just something that he had to go through. This happens in the fight game."
The UFC is likely to promote an undercard bout onto the pay-per-view portion of the show, but it didn't immediately choose the fight. The pay-per-view card also includes a heavyweight matchup between Mark Hunt and Alistair Overeem.
The Associated Press contributed to this report.