The National Citizen Service (NCS) contract with The Challenge has been helping to deliver the government-backed programme for 16- and 17-year-olds but has hit problems over IT issues.
The trust states that it will not renew the contract from 2020, as it has been unable to reach an agreement with the charity to use a shared IT system "that ensures value for money, improves customer experience and protects young people's data".
The trust also cites how 4,000 young people were "let down" by The Challenge this summer because they weren't allocated a place on their chosen programme.
NCS Trust chief executive Michael Lynas said: "We need to ensure a consistent customer experience, secure value for money for the taxpayer and safeguard the data of the young people who take part.
"That's why our contracts stipulate that all partners use a single shared IT platform."
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The Challenge said that the charity was "surprised" by the decision because it believed that negotiations were continuing.
It added: "The Challenge will continue to seek resolution with the NCS Trust."
The NCS contract is a cornerstone of work carried out by The Challenge, not least because, as the charity says in its annual report, "The principal funding source for The Challenge is contract income relating to the delivery of NCS".
The NCS Trust statement said it was unable to award the contract and added that it was "looking forward to working with outstanding and experienced organisations, and their networks of smaller partners to deliver the NCS programme from 2020 onwards".
It added: "The Challenge's current contract ends in December 2019 and they are contracted to deliver the NCS programme until this time. Our recommissioning process is now nearing completion and details on this, and our network of local partners, will be announced in detail soon."
The end of The Challenge contract is not the first problem to hit the NCS - in 2017, regional NCS provider, Engage4Life, went into liquidation.
The NCS was criticised by councils in May when it embarked upon a multi-million pound re-brand.
At the time, the Local Government Association (LGA) condemned the move and argued the money should instead be put directly into local youth provision.
Between 2010/11 and 2017/18 funding for youth services has been cut from £652m to £352m.
However, between 2014/15 and 2017/18 the government spent £634m, which is 95 per cent of its youth services budget, on the NCS. The LGA says that NCS money would be better spent on year-round provision for young people of all ages.
NCS is delivered across the country by a range of charities, college consortia and voluntary, community, and social enterprises and private sector partnerships.
Current larger partners include APM, the English Football League Trust, Ingeus, Inspira, and Reed in Partnership.
These work alongside more than a hundred local delivery partners including Catch 22, Flying Futures, Groundwork, Oxfordshire County Council, Learn by Design, the Jewish Lads' and Girls' Brigade and Weymouth College.