The 31-year-old, who had been hoping to go for another medal at the Olympics in 2014, confirmed the news via Twitter this morning.
He wrote: "Well just found out my funding will be cut in April so I won't be able to compete in commonwealths or Rio even if I wanted to."
He added: "A massive thanks to @uk_sport for supporting me since 98 and helping me achieve my dreams, I couldn't have done it without you!
"And a massive thanks to @britishswimming for not telling me your selfs and me finding out second hand!"
Waterfield, who also has a Commonwealth Games gold and silver medal, picked up his Olympic silver in Athens in 2004.
He compete in London 2012 partnering Tom Daley in the synchro competition.