In an 85-page ruling, the Washington-based International Centre For Settlement of Investment Disputes (ICSID) agreed with Venezuela's argument appealing the case, and overturned part of the decision that it had taken in 2014.
The ICSID ruling was dated Thursday, but released on Friday.
Exxon Mobil originally had sought $12 billion in compensation over the loss of what it said it had already invested and what it expected to reap from the Cerro Negro project, in a heavy oil region known as the Orinoco Belt.
In October 2015, the three-member ICSID arbitration panel rejected Exxon Mobil's arguments that Venezuela's nationalization represented an illegal expropriation, but awarded them payment as "just compensation" under an international investment treaty.
The ruling released on Friday cancels the portion of the original award that dealt with compensation for the Cerro Negro project.
"As far as we know, this is the largest annulment in ICSID history," said attorney George Kahale III, who represented Venezuela.
"We were always confident in our legal position and are very pleased that the annulment committee agreed."
Exxon Mobil did not immediatly respond to AFP requests for comments.