According to a spokesman, the radical scheme by Dutch architect MVRDV 'requires further development' and will be delayed for at least a year.
Due to open in the spring, the 200-tonne, grass-coated structure was to become the fifth temporary pavilion to have been commissioned by the gallery.
Instead, Serpentine Gallery chiefs have now approached Portuguese Pritzker Prize-winner Alvaro Siza and his long-time collaborator Eduardo Souto de Moura to design a Summer Pavilion.
The Portuguese team will follow in the footsteps of some of the most highly regarded global architects, including Zaha Hadid and Daniel Libeskind, who have been asked to create a pavilion for the gallery's annual programme.
Gallery director Julia Peyton-Jones was thrilled by the appointment. She said: 'It is wonderful news that Alvaro Siza and Eduardo Souto de Moura have agreed to create a Summer Pavilion for us.
'They have long been on our wish-list of leading international architects for the structure and we are delighted that they are able to execute their project.'
However, Peyton-Jones was also keen to confirm that the gallery would remain committed to the difficult MVRDV proposals. She added: 'We will continue to work on the development of MRVDV's visionary scheme with the benefit of more time.
'The project is an ambitious and challenging one, which we are anxious to achieve without compromise.'