Iran was among three candidates to host the Boys' Under-19 World Championship next year. Argentina is expected to be chosen.
World governing body FIVB says the decision "has been taken entirely on technical merit."
The FIVB and its Brazilian president, Ary Graca, asked Iran state president Hassan Rouhani last month to release British-Iranian woman Ghoncheh Ghavami.
Ghavami was detained in Tehran in June after trying to attend an Iran-Italy FIVB World League match to protest a ban on women attending the male-only event.
She was sentenced to one year in prison this month for spreading propaganda about Iran's ruling system.