The companies said in a joint statement that they would "discontinue their franchise agreement in the retail business" in India and would "independently own and operate separate business formats".
Walmart has said it wants to operate supermarkets in India after New Delhi moved last year to open up the retail sector to foreign companies in a bid to boost the sharply slowing economy.
But the world's biggest retailer has been frustrated by the government's conditions for foreign investment, and the faltering relationship with Bharti, owner of India's top mobile phone firm.
Walmart has operated since 2007 in India as a wholesaler via its partnership with Bharti, but it is unable to sell directly to consumers.
Walmart had said in 2012 it wants to launch its first store in India within two years, but the company needs a local partner, and it is yet to make a proposal to the government for opening retail stores.
Walmart said in July that it was unable to meet requirements stipulating th