The Adelaide Festival board pulled the pin on the Adelaide Writers' Week five days after axing Randa Abdel-Fattah from its program.
The board's decision triggered a mass boycott as authors and speakers pulled out in solidarity with the academic, leaving the festival's program in tatters.
The board initially claimed past statements from Dr Abdel-Fattah, who has criticised Israel on social media, meant it would not be "culturally sensitive" for her to appear at the festival so soon after an anti-Semitic terror attack at Bondi Beach.
But on Tuesday, it apologised to Dr Abdel-Fattah and announced remaining members of the board would quit immediately or be gone by February 2.
"We recognise and deeply regret the distress this decision has caused to our audience, artists and writers, donors, corporate partners, the government and our own staff and people," the board wrote in a statement.
"This is not about identity or dissent but rather a continuing rapid shift in the national discourse around the breadth of freedom of expression in our nation following Australia's worst terror attack in history."
It came hours after Adelaide Writers' Week director Louise Adler resigned, saying she had fought against the board's decision to axe the prominent academic.
"I cannot be party to silencing writers so, with a heavy heart, I am resigning from my role as the director of the AWW," she wrote in an opinion piece published in The Guardian on Tuesday.
"Writers and writing matters, even when they are presenting ideas that discomfort and challenge us."
Former New Zealand prime minister Jacinda Ardern, British author Zadie Smith, Stella Prize winner Evelyn Araluen, former political prisoner and foreign correspondent Peter Greste, and two-time Miles Franklin winner Michelle de Kretser were among the high-profile figures who pulled out of the festival in support of Dr Abdel-Fattah.
The Palestinian writer had previously been criticised by conservative Jewish groups for social media posts critical of Israel.
Prior to the cancellation, SA Premier Peter Malinauskas said he supported the independence of the board and had a responsibility to advocate against rhetoric that "inflames hate speech."
"Can you imagine if a far-right Zionist walked into a Sydney mosque and murdered 15 people?" the premier told reporters on Tuesday.
"Can you imagine that as premier of this state, I would actively support a far-right Zionist going to writers' week and speaking hateful rhetoric towards Islamic people? Of course I wouldn't.
"The reverse is happening in this instance, and I'm not going to support that either, and that's a reasonable position for me to have."
The writers week, part of the wider Adelaide Festival, was set to begin on February 28.Â
