The MotoGP has been staged at Phillip Island 29 times and is one of regional Victoria's most significant major events.
Its loss strips $54.6 million in economic impact from the state, including $29.4 million in direct local spending in Bass Coast.
The event also supported 284 full-time jobs.
Despite having years to renegotiate the contract, the Labor Government failed to secure a deal.
Leader of the Opposition Jess Wilson said the decision was emblematic of Victoria's decline under Labor.
"The loss of this event is emblematic of Victoria's decline under Labor and a huge blow to the local businesses of Phillip Island.
"With at least $15 billion lost to corruption, is it any wonder why we can't afford to keep major events in Victoria?"
Shadow Minister for Major Events David Southwick said Labor's financial mismanagement was costing regional communities dearly.
"This was one of the largest major events in regional Victoria. It is devastating for the local community and devastating for MotoGP fans."
"Labor cannot manage the budget and cannot manage major events. Victorians are paying the price."
