Opposition lawmakers disrupted the session from the start by shouting slogans.
After a first interruption, the session resumed only to be interrupted again. It was then suspended, with the address delivered by pre-recorded video, reported the BBC.
The suspension means the extradition bill - - which sparked months of protests was unable to be withdrawn formally.
Hong Kong has experienced months of protests since the extradition bill was introduced in April.
The Legislative Council (Legco) resumed on Wednesday for the first time since it was stormed by protesters in July.
Now the withdrawal of the bill will only be possible once Legco resumes.
The bill was suspended in July, but the move failed to quell protests in the city.
On Wednesday, as the city's chief executive was about to begin her speech, opposition lawmakers projected the slogan "Five demands - not one less" on the wall behind her.
Since the protests began in June, they have widened from rallies against the extradition bill to five key demands - -including universal suffrage.
Opposition lawmaker Tanya Chan said Lam was to blame for the city's troubles. "Both her hands are soaked with blood," she said. "We hope Carrie Lam withdraws and quits. She has no governance ability. She is not suitable to be chief executive."
It was the first time a Hong Kong chief executive has been unable to deliver a policy address in the chamber.
Pro-establishment lawmakers condemned the interruption of the session and said that the address was important for the city's economic future.
Lam's interrupted speech came just hours after the US lawmakers supported Hong Kong's protesters by passing a bill aimed at upholding human rights in the city.
After the assembly was suspended a second time, the speech was made available as a video on the Legco website, instead of live from the Parliament chamber.
In the address, she stressed her commitment to "one country, two systems" introduced after British rule ended and that Hong Kong independence was not tolerable.
She then announced several housing and infrastructure policies, saying housing was the most urgent issue the city faces.
( With inputs from IANS )