The singer was allegedly planning to don the outfit - dubbed the 'Terror Bride' - as a comment on women's oppression and war in the Middle East.
However, she has now decided against the costume after advisers warned that the piece - a mix of an Iraqi bridal veil and US soldier's uniform - could put her life at risk.
"Madonna had the outfit ready to go. She was really proud of it and said it was her 'Terror Bride' costume," a source told The Sun.
"She had paraded around in it and said she was going to wear it in her next music video. At first when people started telling her it was madness she just brushed it off.
"But when they mentioned that her actions could put her life at risk she decided to ditch it from her video and certainly won't be wearing it on stage."
They added: "She was really disappointed as she was so adamant about it. And even when she said she wasn't going to go ahead she winked that it was being put aside 'for now'."
Madonna is reportedly planning to release 'Superstar' as the fourth cut to be lifted from her recent album MDNA.
Listen to Madonna's 'Superstar' below: