His decision is the latest in a cultural backlash against Denmark which on Tuesday passed the measures aimed at deterring refugees from seeking asylum.
Cartoons in newspapers around the world lambasted the move, including one by Steve Bell in Britain's Guardian showing Danish Prime Minister Lars Lokke Rasmussen wearing a Nazi-like uniform.
Ai, known for his criticism of China's human rights record, said in an Instagram post on Wednesday he was shocked the Danish government had "decided to seize refugees' private property".
"As a result of this regrettable decision, I must withdraw from your exhibition "A New Dynasty.Created In China" to express my protest of the Danish government's decision," Ai said, addressing exhibition organizers at art museum ARoS in Aarhus.
"The way I can protest is that I can withdraw my works from that country. It is very simple, very symbolic — I cannot co-exist, I cannot stand in front of these people, and see these policies," he told The Guardian.
"It is a personal act, very simple; an artist trying not just to watch events but to act, and I made this decision spontaneously."
Ai's work "Yu Yi", a 12-meter-long man made of bamboo, is part of the exhibition of Chinese contemporary art which ARoS has run since November. It was due to end in May.
"We are now awaiting further developments," the museum said.
Ai said he was also closing his exhibition "Ruptures" at the Faurschou Foundation in Copenhagen.
The prime minister's office and the Culture Ministry did not immediately respond to requests for comment.
Last year Ai accused Lego of censorship after the Danish toymaker initially declined to fulfill a bulk order for him due to his political activism. Lego later dropped restrictions.
