Google has reportedly "effectively ended" plans for a censored search engine in China.
And access to data "integral to Dragonfly... has been suspended for now, which has stopped progress".
Google said it had no immediate plans to launch a Chinese search engine.
What is The Intercept reporting?
Citing internal Google documents and inside sources, the Intercept says Project Dragonfly began in the spring of 2017 and accelerated in December after Google's chief executive, Sundar Pichai, met a Chinese government official.
An Android app with versions called Maotai and Longfei were developed and could be launched within nine months if Chinese government approved, it says.
Using a tool called BeaconTower to check if users' search queries on Beijing-based website 265.com would fall foul of China's censors, Google engineers came up with a list of thousands of banned websites, including the BBC and Wikipedia, which could then be purged from the Dragonfly search engine.
But members of Google's privacy team confronted the Dragonfly project managers, saying the system had "been kept secret from them".
And after several discussions, "Google engineers were told that they were no longer permitted to continue using the 265.com data to help develop Dragonfly, which has since had severe consequences for the project".
What are the issues with launching a search engine in China?
The so-called great firewall of China is notorious for not allowing its citizens free access to all the content available on the internet.
China has in the past two years imposed increasingly strict rules on foreign companies, including new censorship restrictions.
Some Western sites are blocked outright, including Facebook, Twitter and Instagram.
Certain topics such as the Tiananmen Square protests in 1989 are also completely blocked.
References to political opposition, dissidents and anti-Communist activity are also banned as are those to free speech and sex.
Any search engine in China would have to comply with the Chinese government's strict rules on censorship.
by Dave Lee, BBC North America technology reporter
Even with this news today, I don't think Google's ambitions in China are over - just stalled.
Sundar Pichai has clearly decided that China is too important (and lucrative) a market to pass up and so, while Dragonfly has met a significant bump in the road - thanks to its own privacy team, the company will almost certainly find a new approach to serving the Chinese market.
But in doing so it might do serious harm to its brand.
Now more than ever, US technology companies are under pressure to act in the interests of both America and Americans.
Bowing to Beijing's demands with whatever Project Dragonfly morphs into will be a stain on Google's principles and its reputation.
How advanced were the plans?
We learned from Mr Pichai's recent appearance on Capitol Hill that more than 100 engineers had been working on the project at one point in time.
When quizzed by lawmakers on the plans, he said: "Right now, we have no plans to launch in China."
He said all efforts were "internal" and did not currently involve discussions with the Chinese government.
In response to further questions, Mr Pichai said the company would be "fully transparent" with politicians if it released a search service in China.
The BBC understands Project Dragonfly never reached the point of having a full and final privacy review by Google.
A letter from more than 300 Google employees in November, co-signed by Amnesty International, asked the company to halt the project entirely.
Why does Google want to get back into China?
Quite simply, China is the biggest internet market in the world.
Google launched a search engine in the authoritarian state in 2006, google.cn.
Google was compliant with the Chinese government's censorship requirements at the time but the search company pulled the plug in 2010, citing increasing concerns about cyber-attacks on activists.
Despite its main search engine and YouTube video platform being blocked, Google still has more than 700 employees and three offices in China and has been developing alternative projects.
Its Google Translate app for smartphones was approved in China last year.
It also invested in Chinese live-stream game platform Chushou in January and has launched an artificial intelligence game on the social media app WeChat.