Townsville Bishop Michael Putney was diagnosed with inoperable stomach cancer late last year and it has now spread to his liver.
He had been widely tipped as the most likely successor to Mark Coleridge as archbishop of Canberra and Goulburn.
Archbishop Coleridge was appointed head of the Brisbane archdiocese in May 2012.
Canberra and Goulburn's Auxiliary Bishop, Patrick Power, retired a few weeks later.
The archdiocese of Canberra and Goulburn is under the temporary charge of an administrator, Monsignor John Woods, who does not have the full range of decision-making powers enjoyed by a bishop.
A lengthy consultation process is usually conducted before new bishops are appointed. Bishop Putney's illness could lead to additional consultation having to be conducted for Canberra and Goulburn.
Monsignor Woods said it was unclear whether there would be a delay in the appointment by Pope Benedict XVI of a new archbishop of Canberra and Goulburn.
But he said Bishop Putney's illness could have an impact on the timing of the decision.