The moderate former speaker of parliament plans to hold the ceremony next week instead. Karroubi's camp said the government refused to provide a location for the ceremony, as the interior ministry has banned all protest gatherings.
The government has clamped down hard on protests, insisting it would not budge over the disputed elections.
Karroubi earlier assailed the regime, saying he would not accept the election results and therefore also regarded the new government as not legitimate.
Opposition leader Mir-Hossein Moussavi called on protesters to keep rallying but to refrain from violence.
-IANS