"What peace is there now? The world's on fire. Take part in what?" Egyptian President Husni Mubarak told reporters on Monday when asked if Egypt would go to the celebrations.
Egyptian officials confirmed later that a parliamentary delegation and a representative of the Egyptian Foreign Ministry would not go to Jerusalem for the 25th anniversary of the treaty, signed on 26 March 1979, by then President Anwar Sadat for Egypt and Prime Minister Menachem Begin for Israel.
"We condemn this wild attack, whose consequences were not calculated," Mubarak said after talks with US Middle East envoy William Burns. "Such an operation aborts all efforts we were trying to make to bring the peace process back on track."
Egypt was the first Arab state to sign a peace treaty with Israel but Israelis continue to complain that the peace has been cold. Egypt says relations depend on Israel's conduct.
"What peace is there now? The world's on fire. Take part in what?"
The Egyptians had agreed to take part in two separate celebrations, one in the Israeli parliament and one in the Foreign Ministry in Jerusalem, officials said.
The Egyptian decision was the first practical step taken in response to the assassination, which has angered Arabs and Muslims across the Middle East.
Mubarak condemned the assassination as savage but said that the answer was peace talks between Israel and the Palestinian Authority.
Egypt has acted as mediator between the two sides and has been trying to set up a high-level meeting.