The decision by Immigration Minister Alex Hawke on "health and good order" grounds means he could be deported.
However, the 34-year-old Serbian can still launch another legal challenge to remain in Australia.
The men's tennis number one was scheduled to play in the Australian Open, which begins on Monday.
"Today I exercised my power... to cancel the visa held by Mr Novak Djokovic on health and good order grounds, on the basis that it was in the public interest to do so," the minister said in a statement.
The move also means Djokovic likely faces a three-year ban on obtaining a new Australian visa - although this can be waived.
(BBC)
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