Commonwealth Games Federation chief Mike Hooper said the CGF's executive board had received information which raised doubts about its initial decision to admit Khan.
Hooper explained that the earlier ruling to give English-born Khan the all-clear had been based on information provided by Pakistani officials.
"As a consequence of that decision, a few days later information became available via a third party that drew some doubts about the previous information," he said.
Hooper would not give details of the nature of the new information, but said the Pakistan team had subsequently been asked to explain Khan's circumstances.
"They made a frank admission that she wasn't eligible," he added.
Hooper stressed that there was no suspicion that the initial information might have been deliberately incomplete or misleading.
Khan, 20, is the granddaughter of Azam Khan, the four-time British Open champion from 1959 to 1962.
She holds dual nationality as her father is from Peshawar in Pakistan and her mother is British.
She represented England as a junior in 1997 but switched her allegiance last year before becoming Pakistan's national champion.
Games rules state that an athlete must have lived in his or her country for two of the last three years to be eligible.
Pakistan team manager Air Marshal Saeed Qasir Hussain admitted he was disappointed by the decision.
"She is ranked 46 in the world, but she is a great ambassador to promote women's squash in Pakistan.
"She enabled us to enter a team in the mixed doubles and increased the Pakistan women's squad from six to seven members.
"Her addition sent out a positive message.
"Rules are rules though, and we respect this decision."