The Elrow Midlands festival was due to take over Sandwell Valley Country park in West Bromwich this weekend, but is now only going ahead with the event on Saturday.
A representative of Elrow said: "We are very sorry to inform you that the Sunday of Elrow Midlands has been cancelled.
"Whilst it almost feels surreal to be saying this, due to the shortage of CO2 in the UK right now we have not been able to secure enough to ensure that production on both days can be at the high level expected.
"We have made the decision to focus our efforts on the Saturday event only, that will 100% go ahead at full capacity.
"We apologise again for this situation which is beyond our control and hope that you enjoy the Saturday of Elrow Midlands."
Among the headlin acts planned for Sunday was a Groove Armada DJ set.
Ticket holders for the cancelled event on Sunday will have their ticket transferred to Saturday's event, or are entitled for a refund if they cannot attend.
Weekend ticket holders will be automatically refunded 50 per cent of their ticket price.
Britain is currently suffering from CO2 shortages, as two UK fertiliser plants which produce the gas have halted production due to a rise in wholesale gas prices.