The Global Fund to fight AIDS, Tuberculosis and Malaria is suspending more than $US300 million of health funding to Zambia.
It says it is concerned about corruption in connection with grants to the ministry of health.
The BBC reports it is not the first time Zambia has lost aid amid corruption claims: Sweden and the Netherlands stopped health aid and the EU halted road-building funds.
The Global Fund also suspended assistance to Uganda five years ago for "serious mismanagement of its funds".
The organisation was set up in 2002 under the direction of then-UN Secretary General Kofi Annan.
It has distributed more than $US19 billion in aid targeted at tackling HIV/Aids, malaria and tuberculosis.