The couple – who announced their plans to wed in February 2009 after over a year of dating – have decided to end their relationship, but refused to give an official reason.
The former ‘O.C.’ actress’ representative told People magazine: “Yes, the engagement is off.”
However, friends claim distance was the main problem as Rachel lives in Los Angeles, while Hayden is based in his home country of Canada.
One pal said: “It just wasn’t working out.
“Rachel is now focusing on her career, spending time with her family and just moving forward.”
In June, the couple announced they were “taking a break” as they wanted to reassess their feelings for one another.
A source said at the time: “They are taking about a month off and will then revisit their relationship to decide if they should stay together.”
Rachel, 28, and Hayden, 29, first met on the set of the movie ‘Jumper’ and started dating in 2007.