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The proposal, which was worth £10.2 billion, was dismissed by the FTSE 100-listed company, which said that it "fundamentally undervalues the group and its prospects".
Cadbury's shares jumped on the news, rising by over 40 per cent during morning trading on the stock market to 796.50p at 10:08 BST.
The company, which manufacturers Trident gum and Bassett's confectionary as well as Cadbury's chocolate, said that its board "is confident in Cadbury's standalone strategy and growth prospects", adding that its Vision into Action plan is continuing to be successful.
Kraft's offer - which consisted of 300p and 0.2589 Kraft shares per Cadbury share - valued the shares in the company at 745p - a 31 per cent premium on the company's closing share price on September 4th.
It added that it intends to return with an improved takeover offer that will be approved by Cadbury's board members.
