Energy Minister Andrew Younger said Nova Scotians have made it clear they are "not comfortable" with fracking.
"There is not a community in this province ... where there's a large number of people pushing to allow hydraulic fracturing," Younger told a news conference in Halifax.
"The resources belong to the people of Nova Scotia and they get to decide how they are harnessed."
Younger said the province's Liberal government will introduce legislation this fall to prohibit fracking for an indefinite time frame.
In making the announcement, Younger pointed to a key study released in April by an independent group of Canadian scientists.
The Council of Canadian Academies concluded that even though fracking could produce big economic benefits across Canada, there is significant uncertainty on the risks to the environment and human health.
"That contributed quite a bit to this debate," Younger said.
Younger's announcement came less than a week after a panel of Nova Scotia experts released a report saying fracking shouldn't be allowed until more independent research is done on health, environmental and economic impacts.
A two-year moratorium on fracking was put in place by the previous NDP government in 2012 as public protests grew in Nova Scotia and in neighbouring New Brunswick.
On Wednesday, Younger said he took note of what has been happening in New Brunswick, where violent protests against fracking erupted last October near Rexton.
"We obviously wanted to avoid anything like that," he said.
"But this decision is not about avoiding violent protests. Had we allowed hydraulic fracturing in this province we would have managed that in a different way."
Premier David Alward, who has heavily promoted shale gas development in his bid to get re-elected in the New Brunswick election, said Nova Scotia is risking economic decline with its decision.
"If Nova Scotia is saying no to the development of our natural resources including shale gas, then they're saying no to becoming a have economy and have province," Alward said.
The Halifax-based Ecology Action Centre had called for a 10-year moratorium to allow time for a comprehensive study. However, the centre's Jennifer West said she is pleased with the government's decision.
"The environmental community, the grassroots and the rural population in Nova Scotia have really worked hard to make their voices heard," she said. "We're really relieved that the government has heard these voices."
Fracking is a process that forces pressurized water and chemicals into layers of rock to release trapped oil and natural gas.
Industry representatives have said the process is safe, citing 50 years of experience in other parts of North America.
The Canadian Association of Petroleum Producers said it was disappointed with the decision, which it claimed was not based on technical knowledge of industry regulators.
"While the commercial viability of Nova Scotia's onshore natural gas resource has yet to be fully proven, (this) announcement has the potential to preclude Nova Scotians from benefiting from the responsible development of this resource," association president Dave Collyer said in a statement.
However, critics have focused much of their attention on high-volume hydraulic fracturing for gas trapped in shale deposits. This process, which requires far more water than conventional fracking, has been around for less than a decade.
Proponents of fracking say the industry could spur Nova Scotia's stalled economy and reduce its reliance on polluting, coal-fired plants.
The expert panel led by Cape Breton University president David Wheeler estimated that under a lower- to medium-case scenario of 4,000 wells, the industry could be worth up to $1 billion annually to the economy and create as many as 1,500 direct jobs in the development phase.
Younger played down those numbers, suggesting the Wheeler report looked at the onshore oil and gas industry as a whole and not shale gas fracking in particular.
"It's speculation what that net revenue would be," Younger said. "Only a small portion of that is actually related to hydraulic fracturing."
Denver-based Triangle Petroleum drilled several test wells in central Nova Scotia in 2007 and 2008, but only three involved hydraulic fracturing. The wells were the first and only ones to be fracked in the province.
They failed to produce any commercial quantities of gas, and the company is still trying to get rid of two holding ponds containing 30 million litres of contaminated fracking wastewater.