The proposed sites, at Monkerton and New Court, will be "released for other uses" after an inspector's report said further consultation was needed.
The council has said it will look at other sites across Exeter but that it is "far too early" to commit to any.
The proposals had "proved unpopular with local people", said the report by inspector Jill Kingaby.
Thirteen traveller pitches were proposed at both sites.
Residents had feared property prices in the area would drop if the Gypsy sites were approved.
Councillor Rachel Sutton, lead councillor for sustainable development and transport, said they were going back to the beginning and looking at all potential sites.
"Maybe we did get it wrong and for that reason we're starting again."
The inspector, who was appointed by the secretary of state for communities and local government, held public hearings in June and August.