Goulburn Ghost Tours manager Louise Edwards confirmed on Tuesday night the company would no longer run the Belanglo Forest ghost tours.
"From here on in, we will not be running Belanglo tours," she told Channel Ten's The Project.
The NSW government and victim support groups had condemned the tours.
Goulburn Ghost Tours has been taking groups to Belanglo, 120km (75 miles) south-west of Sydney.
The company initially defended the tours, saying they were run with "respect" and were not intended to upset anyone.
Milat is serving consecutive life sentences for murdering seven backpackers - two Britons, three Germans and two Australians - in the 1990s.
He had buried their bodies in Belanglo, which was also the site where a teenager related to Milat murdered a friend in 2010.
The family of the victim still live in the local area. Local media reported their disgust that the tours were being run.
Goulburn Ghost Tours' website and Facebook page remained offline on Wednesday and a phone number for the company appeared to be disconnected.
A cached version of the site advertising the Extreme Terror Tour said people would visit Milat's "old stomping ground", calling it "this most terrifying of locations".
It said it would use "paranormal techniques" to solve a murder.
"Are you ready to turn grey overnight? Do you love to be frightened? Would you like to solve a crime? Then the GGT Extreme Terror Tour is for you!" it said.
Ms Edwards told The Project that in hindsight, more thought should have gone into the marketing of the tours.
She said the company had received a lot of hate mail but also many "poignant and thoughtful" emails about why the tours should be cancelled, which "made us see this in a different light".

There have now been a total of 102 arrests since the match between Hibernian and Rangers at Hampden Park. Fans spilled onto the pitch after the final, which Hibernian won 3-2.
The latest men arrested are aged 17, 18, 22, 32 and two men aged 23.
Police Scotland confirmed a report would be submitted to the procurator fiscal.
A dedicated email address has been set up for anyone with information.
They can also contact Greater Glasgow CID on 0141 532 5457 or provide information anonymously via Crimestoppers.
A company criticised for conducting tours of a New South Wales (NSW) forest where serial killer Ivan Milat buried his victims has cancelled the tours.
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A further six men have been arrested in connection with violence and disorder at the Scottish Cup Final in May.