One embodiment of the present invention provides a system which facilitates selective prefetching based on resource availability. During operation, the system executes instructions in a processor. While executing the instructions, the system monitors the availability of one or more system resources and dynamically adjusts an availability indicator for each system resource based on the current availability of the system resource. Upon encountering a prefetch instruction which involves the system resource, the system checks the availability indicator. If the availability indicator indicates that the system resource is not sufficiently available, the system terminates the execution of the prefetch instruction, whereby terminating execution prevents prefetch instructions from overwhelming the system resource.