"This postponement is as a result of an internal administrative problem in the Cameroon national team," the Algerian Football Federation said in a brief statement.
"FAF deplores this unacceptable and unsporting situation," hinting it would seek compensation for lost costs.
A statement from Cameroon's players said they had not received money promised for their appearance in a four-nation tournament in Morocco at the weekend, where they played on Friday against Sudan and on Sunday against the host nation.
"We have decided not to make the trip to Algiers and call on the authorities in Cameroon to keep to their agreements," a statement signed by the players and published on the www.camfoot.com website said.
"The problem of the fees was raised a week ago and no solution found. The team played with commitment and professionalism in Marrakech but have decided not to go to Algeria."
They took their action after Sunday's match against Morocco in Marrakech, where captain Samuel Eto'o first told reporters of the squad's intention.
Several meetings between Cameroon federation officials and players, plus reports of the arrival of cash to pay the players, followed but they failed to solve the situation.
It is the second game between top African sides that has been cancelled this week after Ivory Coast pulled out of their friendly with Senegal in Paris on Tuesday because of travel problems.
Algeria will play a match between their squad members in place of the clash with Cameroon and allow free entry to spectators, the federation said.
Disputes over money and threats of strikes are common in African football but rarely are matches called off because of payment disputes.
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