The exhibition titled "The 3,500 Year Relationship of the Jewish People to the Holy Land" was due to open Tuesday at UNESCO's Paris headquarters.
But the UN agency said it "received a letter from 22 member states of the Arab Group, expressing their concern that the planned exhibition could impact negatively on the peace process and current negotiations under way in the Middle East".
In addition, there were several "unresolved issues relating to potentially contestable textual and visual historical points" in the exhibition jointly organised with the Simon Wiesenthal Center.
"In this context, regrettably, UNESCO had to postpone the inauguration of the exhibition," said the UN agency.
"Consensus on UNESCO decisions and resolutions regarding the Middle East has been especially important, to avoid confrontation and politicization," it added.
The cancellation of the exhibition came as UNESCO's relations with Israel were at a low, after Palestine was made a member of the agency in October 2011.
In response, Israel and its staunch ally the United States cut funding to UNESCO, sparking a major financial crisis at the agency and putting hundreds of jobs at risk.