"It is true that the deal will be ended," Löfven said to reporters on Tuesday evening during an official visit to Kiev, Ukraine.
"This has been agreed for some time now. It has nothing to do with what has happened in recent days," he added.
Sweden has been selling arms to Saudi Arabia for decades but the policy has been strongly debated in the Nordic nation and caused divisions within the Social Democrat-Green coalition government.
The termination of a controversial military agreement between the two countries comes hot on the heels of criticism from the Arab League of comments made by Sweden's Foreign Minister Margot Wallström about human rights violations in the middle eastern country.
Margot Wallström said on Monday that Saudi officials had stopped her from making her opening address to an Arab League meeting in Cairo due to her stance on human rights.
“The ministers have voiced their condemnation and astonishment at the issuance of such statements that are incompatible with the fact that the Constitution of the Kingdom of Saudi Arabia is based on Sharia,” read a statement issued by the ministers following their Arab League meeting in Cairo and reported by the Swedish media on Tuesday.
“Sharia has guaranteed human rights and preserved people’s lives, possessions, honour and dignity. The ministers consider the comments as irresponsible and unacceptable,” the statement added.
Wallström had been invited as an honorary guest to the Arab ministers' meeting in praise of her government's decision to recognise Palestine in October.
Her cancelled opening speech - published by the Swedish foreign ministry - mentioned neither Saudi Arabia nor Wallström's feminist foreign policy agenda but stressed women's and human rights.
Wallström's press secretary Erik Boman told The Local earlier on Tuesday that the Arab League's statement "should be interpreted as a way of Saudi Arabia trying to save face".
"The statement was made public yesterday, and we knew about it," he said.
"It is one of very many statements on different issues released by the Arab League after a meeting - by tradition they do that kind of thing."
Foreign Minister Margot Wallström had been due to give a speech to the Arab League. Photo: TT
On Monday Wallström said it was a "shame" that she had been blocked from speaking.
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"The explanation we have been given is that Sweden has highlighted the situation for democracy and human rights and that is why they do not want me to speak," she told Swedish news agency TT.
An Arab diplomat confirmed to the AFP news agency that Saudi Arabia had stopped the Swede from making her opening speech.
Meanwhile the EU expressed concerns over the move.
"We regret that the Swedish foreign minister was not able to deliver her speech," European Commission spokeswoman Maja Kocijancic told a press briefing on Tuesday.
EU foreign affairs chief Federica Mogherini will speak to Wallström and Arab League chief Nabil al-Arabi "to understand this situation", she added.