My wife dislikes my parents due to the problems they caused in our marriage and she is demanding from me to cut ties with my parents. Is it allowed in Islam?
It is absolutely forbidden in Islam to cut ties with your parents and this sin is one of the most dangerous major sins which has disastrous results in this life and hereafter. Never listen to any one who tell you to be away from your parents because this is what Shaitan wants you to do in order to be with Shaitan against Allah and against your parents. Whatever your parents did or still do which you don't like, you must be very nice to them even if they were unbelievers.
Wassalam.