The Board of Control for Cricket in India said the deal had been called off for the 2020 tournament, which is due to start in the United Arab Emirates on September 19.
Vivo, which signed a five-year contract in 2017 worth more than $330 million to sponsor the world's richest cricket tournament, said the decision had been mutually agreed.
Calls for a boycott of Chinese firms grew after the June 15 clash in which 20 Indian soldiers died.
The Indian government has already banned dozens of Chinese smartphone apps -- including the popular video-sharing platform TikTok -- and also taken other measures to restrict trade with China.
Sandeep Goyal, chairman of Mogae Media, a leading Indian communications agency, told AFP the rupture would have "multiple repercussions" for India on top of aproximately $60 million the IPL has already lost this year.
"The cumulative hit of anti-Chinese sentiment could be in the region of 10 billion rupees ($133m)," he said.
The IPL and BCCI have tie-ups with companies including Paytm, Swiggy, Dream11 and Byju, which all have Chinese investment.
According to reports, the BCCI was in talks with Indian companies about taking over as title sponsor for 2020 but expected to make less than the $60 million it would have got from Vivo.
Each of the eight IPL teams stands to lose nearly $4 million from the lost sponsorship, a team official told AFP on condition of anonymity.
"Nothing much can be done about it," the official said.
The IPL Twenty20 league is a huge revenue earner for BCCI and is estimated to generate more than $11 billion for the Indian economy.
The tournament normally starts in March, but was repeatedly postponed this year because of the coronavirus pandemic.
With coronavirus cases still increasing by 50,000 a day in India, the tournament will be played in Dubai, Abu Dhabi and Sharjah, with the final on November 10.