Liberals leader Matthew Guy on Wednesday vowed to instead pour the money into Victoria's health system, which he says has been plagued by years of mismanagement and neglect.
The Liberal Nationals say the suburban rail loop is the most expensive, "yet least scrutinised project in Australia's history".
Mr Guy has promised to put the stretch from Cheltenham to Box Hill in Melbourne's east on ice.
The government has said the first part of the project, encompassing the eastern stretch, will cost up to $35 billion.
"This November, Victorians face a clear choice. A choice between immediately rebuilding Victoria's broken health system or a train line in 13 years' time," Mr Guy said.
Early works worth about $2.3 billion were already budgeted for and signed off on for the rail loop, so the opposition wouldn't rip up those contracts, Mr Guy said.
"When the state can afford it, we might be able to build it but the key point is, what's the priority now - you can't do both," he told reporters on Wednesday.
"You can't go and borrow tens of billions of dollars from the federal and state government and rebuild the health service."
The opposition has pledged to upgrade hospitals across the state and build major health centres in Melton, Mildura, West Gippsland and Wodonga as well as a dedicated infectious diseases response centre.
Additionally, it has committed to halving Victoria's elective surgery wait lists within four years if elected and providing free public transport to more than 260,000 healthcare workers.
"We must be able to get an ambulance when people call for one, we must be able to get a bed when we come to a hospital, we must be able to be seen when we present to an emergency department," Mr Guy said.
The state government has staunchly defended the suburban rail loop, saying on Wednesday scrapping the project would amount to Mr Guy cutting 24,000 jobs.
Construction on the first phase is expected to be completed by 2035.
Trains would take three to four minutes between six stations, with a journey from Cheltenham to Box Hill taking a total of 22 minutes.
The eastern and northern stretches of the rail loop would take about 606,000 car trips off Victoria's roads every day by 2056 and the project would deliver up to $58.7 billion in benefits, the government said.
"Victorians voted for this project, that will create thousands of jobs - and today Matthew Guy has finally come clean: the Liberals will cut the Suburban Rail Loop," Deputy Premier and Suburban Rail Loop Minister Jacinta Allan said.
The move appeared to be "a bit of desperate act from a desperate individual", Ms Allan said.
The 90-kilometre orbital rail line's second section, the northern part, would run from Box Hill to Melbourne Airport.
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