The ride hailing firm has around 100 self-driving cars in the US state.
The governor of Arizona on Monday suspended Uber’s ability to test self-driving cars on public roads in the state following a fatal crash last week that killed a 49-year-old pedestrian.
The decision to block Uber is a blow to the ride-hailing company, which sees its future success reliant on driverless vehicles, and trails competitors such as Alphabet’s Waymo in developing the technology.
Arizona had been a key hub for Uber, with about half of the company’s 200 self-driving cars and a staff of hundreds.
In a letter sent to Uber chief executive Dara Khosrowshahi and shared with the media, Governor Doug Ducey said he found a video released by police of the crash “disturbing and alarming, and it raises many questions about the ability of Uber to continue testing in Arizona.”
Police and safety regulators are investigating the March 18 fatality in which a woman crossing a four-lane road at night was struck and killed by an Uber self-driving SUV. The incident has focused new attention on the lack of clear safety standards for such vehicles.
Mr Ducey called the crash “an unquestionable failure.”
“In the best interests of the people of my state, I have directed the Arizona Department of Transportation to suspend Uber’s ability to test and operate autonomous vehicles on Arizona’s public roadways,” Mr Ducey said.
The letter strikes a dramatically different tone from late 2016, when Mr Ducey invited Uber to his state with celebration, saying “Arizona welcomes Uber self-driving cars with open arms and wide open roads.” At the time, a banner was hung on a building in Phoenix welcoming Uber.
Uber moved its driverless cars to Arizona from San Francisco after California regulators shut down the self-driving fleet for not having the proper permits.
Uber, which had already pulled its self-driving cars off the road after the accident, said in a statement on Monday that it will “keep a dialogue open with the Governor’s office to address any concerns they have.”