The national Iranian Oil Company (NIOC) dropped the Polish Oil and Gas Company (PGNiG) from Lavan gas field development project for repeated delays, replacing it with a consortium of Iranian companies.
Iran has toughened its stance over foreign companies that are not fulfilling their promises.
Oil Minister Rosatm Qassemi has said the Islamic state does not need foreign investment in its oil and gas industries.
"Four years after negotiations between National Iranian Oil Co.(NIOC) and PGNiG for inking a $7billion contract to develop the Lavan gas field, this European company was excluded from the project due to missing several deadlines," MNA reported.
According to the report, a $1.9billion deal would soon be ceded to a consortium of domestic contractors. Officials at the Oil Ministry could not immediately be reached for comment.
Iran also announced in October that it had excluded Russian gas export monopoly Gazprom from Azar, a major on-shore oil field, saying it had failed to live up to its undertakings.
In February 2008 PGNiG said it had signed a preliminary deal with the Iranian Offshore Oil Co. to cooperate on managing already discovered gas reserves.
Poland, which largely depends on imports of Russia gas, has made diversification of sources of supply a priority in recent years.
The offshore Lavan natural gas field, which was discovered in 2003, has reserves in place of around 10 trillion cubic feet.
Iran, which sits on the world's second largest reserves of both oil and gas, is facing US sanctions over its civilian nuclear program.
Iranian officials have dismissed US sanctions as inefficient, saying that they are finding Asian partners instead. A large number of Chinese, Indian and other Asian firms have negotiated or signed up to oil and gas deals with Iran.
Following US pressures on companies to stop business with Tehran, many western companies decided to do a balancing act. They tried to maintain their presence in Iran, which is rich in oil and gas, but not getting into big deals that could endanger their interests in the US.
Yet, after oil giants in the West witnessed that their absence in big deals has provided Chinese, Indian and Russian companies with excellent opportunities to sign up to an increasing number of energy projects and earn billions of dollars, they started showing increasing interest to invest or expand work in Iran.
Some European states have also voiced interest in investment in Iran's energy sector after a gas deal was signed between Iran and Switzerland three years ago regardless of the US sanctions.
The National Iranian Gas Export Company and Switzerland's Elektrizitaetsgesellschaft Laufenburg signed a 25-year deal in March 2008 for the delivery of 5.5 billion cubic meters of gas per year.
The biggest recent deal, worth €100m ($147m, £80m), was signed by Steiner Prematechnik Gastec, the German engineering company, in 2009 to build equipment for three gas conversion plants in Iran.
In December 2010, the New York Times reported that over the past decade, United States-based companies have done billions of dollars in trade with Iran despite sanctions and trade embargoes imposed on Tehran.
One American company, the daily said, was permitted to do work on an Iranian gas pipeline, despite sanctions aimed at Iran's gas industry in particular.
The transactions have been made possible by a 2000 law that allows exemptions from sanctions for companies selling food or medical products, the report added.
Iranian officials have always stressed that the International and unilateral sanctions against Iran have had no result but inflicting damage on the European companies.