The UK will be withholding £21m of aid to Rwanda amid concerns the state is supporting rebels in the Democratic Republic of Congo.
Announcing the decision, International Development Secretary Justine Greening said the money, which was due to be handed over next month, would not be released because President Paul Kagame's regime had breached agreements.
"The Government has already set out its concerns over credible and compelling reports of Rwandan involvement with M23 in DRC," she said.
"This evidence constitutes a breach of the partnership principles set out in the Memorandum of Understanding and, as a result, I have decided not to release the next payment of budget support to Rwanda.
"We are committed to finding lasting solutions to the conflict in this region and will work with the Governments of Rwanda and DRC to secure a peaceful resolution to the situation in eastern DRC."
She added that the department will provide a further £18m of immediate humanitarian support in DR Congo, providing emergency food for 100,000 people, clean water and education.
Violence in DR Congo has been spiralling, with reports of summary executions by the rebel M23 group and growing numbers of refugees.
Rwanda has been accused of equipping them with sophisticated weaponry, including night vision goggles and 120mm mortars.
Last week, the rebel group seized Goma - a crucial provincial capital in eastern Congo - sparking international concern.
The UN has around 1,400 peacekeepers in and around Goma but it could do nothing to stop the rebels' advance through the lakeside city of one million people because they do not have a mandate to engage them.
UN Secretary General Ban Ki-moon has called on Rwandan President Paul Kagame to contact the M23 leaders and halt their advance amid fears their next target is Bukavi, another provincial capital, south of Goma.
Foreign Secretary William Hague has also called for a "cessation of hostilities" and urged the rebel group to engage in talks to avoid further bloodshed .
However, the rebels have refused to withdraw from Goma and have threatened to march all the way to the Congolese capital Kinshasa, about 950 miles (1,500km) away.
The UK suspended the last tranche of £16m of aid in July after an interim UN report highlighted Rwanda's role in backing the insurgents.
However, Ms Greening's predecessor, Andrew Mitchell, controversially reinstated the aid on his last day in the job. He authorised £8m as direct budgetary support, and diverted the other half to specific development programmes.
Pressure to halt aid payments intensified again earlier this month when UN experts presented more evidence of Rwanda's involvement in fuelling the conflict.
Prime Minister David Cameron's spokesman denied that the decision to reinstate aid in September had been a mistake. He also insisted the decision was not taken by Mr Mitchell alone, but was a "Government decision".
TaxPayers' Alliance campaign manager Robert Oxley demanded an urgent re-examination of the UK's aid policy.
He said: "It's appalling that British taxpayers' money has gone directly to a government involved in a proxy war that has brought untold misery to hundreds of thousands of people.
"This announcement leaves a huge question mark over why DfID, and specifically Andrew Mitchell, reinstated the aid programme to the Rwandan government which was fanning the flames of conflict in DRC."