The decision was taken in the interests of keeping people safe due to very strong winds forecast for Sunday into Monday.
The illuminations show at Derry' s historic city centre locations such as the Guildhall, The City Walls overlooking the Bogside and at Magazine Street, and St Columb's Cathedral has been running nightly since Thursday and will be staged again this evening, Saturday, from 6pm to 9pm.
It will also return next week from Thursday to Sunday at the same times.
The festival tells the story of Derry through projected moving images and narrations across key landmarks. Numerous indoor live music concerts are also taking place across various venues.
A spokesperson for Derry City and Strabane District Council said: "With very high winds expected tomorrow the decision has been taken in the interests of both staff and the general public to cancel Sunday night's Illuminate event. Due to potential risks to health and safety we would ask that people stay safe and stay at home.
"We are still encouraging people to wrap up warmly and come out to enjoy this evening's event between 6pm-9pm, or to wait until Illuminate returns next week from Thursday 24-Sunday 27 Feb, 6pm - 9pm."