A spokeswoman for Public Safety Minister Vic Toews says he has conducted a review and concluded chaplains employed by the prisons must provide services to inmates of all faiths.
Early last month, the agency put out a request for a proposal for a Wiccan chaplain who would provide about 17 hours of service a month in B.C.
Shortly after The Canadian Press reported on the contract in September, Toews's office issued a statement saying it would not proceed with the plan until after a review.
The spokeswoman says the federal government "is not in the business of picking and choosing which religions will be given preferential status through government funding."
According to a March 2011 report, 120 full-time and part-time institutional chaplains, 132 contract holders and 3,045 volunteers worked in Canada's federal prisons, but details on their faiths weren't included.