The doctors at the privately run Max Hospital had pronounced the baby dead hours after his twin who was stillborn on 30 November.
The parents found that the baby was alive while they were on their way to his funeral.
The incident sparked outrage and a debate over the quality of private healthcare which is often costly.
The privately run Max Hospital said in a statement that "this strict action has been taken on the basis of our initial discussions with experts".
"While the inquiry by the expert group which includes external experts from Indian Medical Association is still in process, we have decided to terminate the services of the two treating doctors," the hospital added.
The government's inquiry into the incident is ongoing.
The incident came to light when the parents noticed one of the babies squirming inside the plastic bag that doctors placed the infants in.
According to the twins' grandfather, the stunned family rushed the newborn to a nearby hospital where they were told that their baby was still alive, local media reported.
This was the second instance in recent months where a private hospital in India has been called out for negligent care. Last month, a girl died of dengue fever in another hospital and the parents allege they were overcharged for her treatment.