The Pentagon is scrapping a multibillion dollar cloud computing contract, which sparked a row between Microsoft and Amazon.
The US Department of Defense said the $10bn contract no longer met its current needs due to the "shifting technology environment".
Microsoft was awarded the contract, but Amazon claimed President Trump had influenced the decision.
Amazon and Microsoft will both have the opportunity to bid for a new contract.
After Microsoft won the massive Joint Enterprise Defense Infrastructure (Jedi) contract, it drew complaints and a legal challenge from tech rival Amazon, which claimed that the choice was politically motivated.
The Department of Defense (DoD) said in a statement on Tuesday: "With the shifting technology environment, it has become clear that the Jedi Cloud contract, which has long been delayed, no longer meets the requirements to fill the DoD's capability gaps."
It added that it would seek new proposals "from a limited number of sources", including both Amazon and Microsoft.
The two tech giants are the only suppliers it said would be capable of meeting the brief, although it would consider other firms.
The Jedi system was designed to replace the DoD's ageing computer networks with one single cloud system, which would have hosted classified secrets and provided artificial intelligence-based analysis to the military.
But after the work was awarded to Microsoft in 2019, Amazon - which was seen as the favourite for the project - filed a legal challenge to object.
One crucial missing detail
The Pentagon press release said a lot of things.
It talked of how technology had "evolved", about "cloud conservancy", and industry "advances".
But it omitted one crucial detail - that Amazon had accused Donald Trump of exercising undue influence over the decision.
The former president didn't exactly hide his distaste for Amazon boss, Jeff Bezos.
Mr Trump referred to the Washington Post (which Mr Bezos owns) as 'Amazon Washington Post' and penned tweets about him calling him 'Jeff Bozo'.
When Amazon pitched for a lucrative government cloud computing contract, many analysts believed they were the ones to beat.
However, they didn't win that contract. Amazon has since been arguing that Mr Trump exercised undue influence in the procurement process.
The Pentagon faced extended legal challenges by Amazon, and it seems likely that, too, was a factor in this decision.
An Amazon Web Services spokesperson told the BBC: "We understand and agree with the DoD's decision.
"Unfortunately, the contract award was not based on the merits of the proposals and instead was the result of outside influence that has no place in government procurement."
They added that they "look forward" to supporting the department's modernisation efforts.
Microsoft said in a statement on Tuesday: "It's clear the DoD trusts Microsoft and our technology, and we're confident that we'll continue to be successful as the DoD selects partners for new work."