Lopez's Thursday show at midnight will be the final one, the cable network said in a statement.
"TBS has reached the difficult decision not to order a third season of `Lopez Tonight,"' the network said, adding that it was proud to have worked with the "immensely talented comedian and entertainer."
TBS declined further comment. The decision was based not only on ratings but also the cost of the show, according to a person familiar with the production, who spoke on condition of anonymity because TBS hadn't authorized public comment.
A call to Lopez's representatives was not immediately returned.
The comic gave up his 11 p.m. ET time slot to make room for O'Brien, who joined TBS after leaving NBC's "Tonight" over a time-slot dispute that ended up reinstating Jay Leno as "Tonight" host.
The plan for TBS was to have a one-two punch of late-night shows that would particularly appeal to young viewers, but the results have been unimpressive and the cancelation unsurprising, said media analyst Brad Adgate of Horizon Media.
"The only positive was a young median age" of about 32, Adgate said, which is part of the younger adult audience favored by advertisers.
Lopez was among the rare minority entertainers to get a shot at a late-night show, with Arsenio Hall and Wanda Sykes also in the group. Late-night hosts are uniformly white and male, including O'Brien, Leno, David Letterman, Craig Ferguson, Jimmy Fallon and Jimmy Kimmel.
Neither Lopez nor O'Brien has been covered in ratings glory since TBS made its bold move to snare the former broadcast network star.
Lopez's total viewership dropped 40 percent in its second year, from an average of 910,000 nightly viewers at 11 p.m. ET to 543,000 at midnight. In August, the audience has dropped to 391,000.
"Conan" has been drawing slightly more than 1 million viewers for the season, just 13 percent higher than Lopez did in his first year, Adgate said, citing Nielsen Co. figures.
For the first part of August, "Conan" is averaging 709,000 nightly viewers. During its debut month, November 2010, O'Brien's show had about 2 million nightly viewers.
In comparison, "The Daily Show With Jon Stewart" is getting nearly 1.3 million viewers for Comedy Central at 11 p.m. ET, with "The Colbert Show" following it up at 11:30 ET with an average 982,000 viewers.