Slow preparations for the January 12/February 4 tournament led to a decision widely anticipated for several weeks.
A CAF inspection team departed Kenya in September to report that only one of the four venues was ready to stage the tournament restricted to home-based footballers.
Some CAF officials in Accra also expressed concern about the political situation in Kenya, where recently annulled presidential elections are set to be rerun late October.
It is the second time the regional economic powerhouse has lost the right to stage a CAF competition after being replaced by South Africa as 1996 Africa Cup of Nations hosts.
Kenya would have been the second successive east African country to stage the CHAN after Rwanda in 2016.
Other hosts since the 2009 inception of the Nations Championship were the Ivory Coast, Sudan and South Africa.
There has been media speculation that Morocco or South Africa may replace Kenya.
Angola, Burkina Faso, Cameroon, Congo Brazzaville, Equatorial Guinea, Guinea, Ivory Coast, Libya, Mauritania, Morocco, Namibia, Nigeria, Sudan, Uganda and Zambia have qualified for the 2018 finals.
Kenya completed the line-up as the host nation — a position they now forfeit.
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