The tournament, which is rated behind the Olympic Games and World Cup in the international hockey calendar, was supposed to be held in New Delhi starting on December 3.
"We regret that we have to move the Champions Trophy from India," said FIH President Leandro Negre.
"It is difficult for the teams, the organizers and the fans. But we feel that this is the only way to maintain the integrity of our sport."
The immediate setback of this decision is that the Indian men's hockey team will not be able to play in the prestigious tournament in which only the top six hockey nations can participate, since India are currently ranked ninth.
Instead, they will have to qualify for the event through the Champions Challenge.
"As a result of no longer hosting the Champions Trophy, India has been invited to play in the Champions Challenge to be held in South Africa in November," said the FIH in a press release on Tuesday.
This will also put into doubt India's qualification hopes for the 2012 Olympics.
The FIH said the decision to take away hosting rights from India was made due to "problematic governance of the sport in India."
There is an ongoing power struggle in Indian hockey between Hockey India (HI) and the Indian Hockey Federation (IHF).
Several attempts to merge the two units have failed, with neither willing to concede authority and power. The FIH said it will continue to monitor the developments and decide on the future of several international tournaments that have been allotted to India.
The Olympic qualification tournament, scheduled to be held in Delhi in February 2012, will also be in jeopardy unless the two bodies merge to present a unified structure that the FIH has been insisting on.
"It is a fundamental and non-negotiable requirement of the Olympic Charter and the FIH Statutes that there be only one governing body for any one sport in any country with exclusive authority and responsibility to govern, organize national competitions and to enter national teams in international competitions," the release pointed out.
Michael Green, two-time Olympian and Chairman of the FIH Athlete's Committee, added: "The first priority has to be the athletes, and while this was a tough decision for the FIH to make, I feel that they have ultimately made the choice that is best for the athletes involved."
A replacement venue is expected to be announced within a week, with Auckland, New Zealand among the front-runners to host the event.
"The schedule and line-up of the Champions Trophy will be determined when the host is announced. However, the event will take place during the same window of December 3-11," said the FIH statement.
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