Allen was set to launch a site with Select Property Group next to their upcoming CitySuites serviced apartment development in the city centre this spring.
But writing in an Instagram post on 28 December the chef confirmed that he had parted ways with the project.
“Life is full of twists and turns…Manchester is no more unfortunately – however watch this space exciting news on the way for 2018," Allen wrote.
A representative for Select Property Group told BigHospitality there were still plans to open a restaurant at the site without Allen, and further details would be confirmed shortly.
“We have been working with chef Tim Allen for the last three months on a new restaurant concept in Manchester,” the company said in a statement.
“After full and careful joint consideration we have concluded that the economics of this operation do not work for either party.
“We thank Tim for his extremely valuable contribution to the project during his time with us and we wish him every success in all his future endeavours.”
Allen won a star at The Wild Rabbit in Kingham in the 2017 Michelin Guide, but left the pub earlier this year.
He joined Select Property Group as executive director of food and beverage in September and was set to work on the food offering across the company’s portfolio alongside the Manchester restaurant.
The chef will be cooking at Adam Reid at The French in aid of Hospitality Action on 31 January, and he has also tweeted that he is looking for chefs to work with him in February 2018.