The State Department will not renew Blackwater Worldwide's contract to protect American diplomats in Iraq when it expires in May, a senior U.S. official said Friday.

The official told The Associated Press that the contract will expire because of the Iraqi government's decision to deny Blackwater a license to operate. The Iraqis informed the State Department last week of the cancellation, which was made amid lingering outrage over a September 2007 shooting in Baghdad's Nisoor Square that left 17 Iraqi civilians dead.

"The Blackwater contract for Iraq will not be renewed," the official said, adding, however, that it was "basically a moot point because they were not going to be allowed to operate in Iraq anyway."

The official spoke on condition of anonymity because the decision has yet to be announced.