The decision bowed to protests by human rights activists that had been gathering momentum throughout the world, but particularly in the United States. It is a striking indication of the power of threatened consumer boycotts in the face of human rights abuses.
The surprise decision came only a day after its Danish competitor, Carlsberg, also revealed that it would be pulling out of Burma rather than face the risk of an international boycott of its products.
Both retreats, while embarrassing for the companies, will be a morale booster for the pro-democracy leader, Aung San Suu Kyi, who recently implored foreign governments and corporations not to do business in her country while it remains under military dictatorship.
Until yesterday, Heineken had been forging ahead with a project to open a brewery in Rangoon by early next year. Through a Singapore-based affiliate, it would have owned 60 per cent of the new plant. The remainder would have been held by Burma's Union of Myanmar Economic Holdings, which is controlled by the state.
Confirming that Heineken was scrapping its proposed $30m (pounds 20m) investment first entered into 18 months ago, the company's chairman, Karel Vuuresteen said in a statement: "Since then the public opinion and issues surrounding this market have changed to a degree that could have an adverse effect on our brand and corporate reputation".
Carlsberg had also been pursuing plans to invest in a separate brewery in Burma. Announcing its decision on Tuesday, the company said that there "were various reasons" for pulling out, "partly of a commercial nature, partly because of developments at home".
Denmark is at the forefront of proposals for European Union sanctions against Burma following the death in Rangoon jail last month of James Nichols, who was honorary consul for Denmark, Finland, Norway, Sweden and Switzerland.
Anger against Heineken had been building in the United States, where it is the most widely drunk imported beer. Among bars in New York that had ceased selling Heineken was Wetlands, owned by Larry Bloch. "We replaced them with Sam Adams and a variety of microbrews. There haven't been any complaints," he said.
Financial pressure was also building on Heineken. Simon Bellenness, an analyst for Boston's Franklin Research and Development Corporation which manages assets for socially-conscious investors, was among those publicly to chastise Heineken. Before yesterday's announcement, he suggested that its partnership in Burma was "particularly egregious as it is an example of exactly the kind of foreign investment Aung San Suu Kyi has asked Western firms not to engage in".
Several American companies have acted in recent weeks to disengage from the country. Those to have withdrawn completely include Levi Strauss and Reebok, while Pepsi Cola said it was abandoning 40 per cent of its stake in a plant there.
Last month, meanwhile, Massachusetts became the first US state to ban state contracts with any companies doing business in Burma.