Football Australia on Friday confirmed United would have their licence withdrawn as the current ownership were unable to satisfy the financial criteria required to maintain it.
The news, which leaves players and staff in limbo, comes just three years after United's first A-League Men championship.
United have been in financial turmoil for months, with players and staff paid late in April, May and June while superannuation payments were also delayed.
United, based in Tarneit, in Melbourne's western suburbs, have also been unable to register players due to a FIFA ban related to an ongoing dispute with former striker Aleksandar Prijovic.
That ban meant new signing Jaiden Kucharski and captain Ben Garuccio could not be registered in time to play in United's Australia Cup round of 32 loss to Sydney FC.
The club, led by chairman Jason Sourasis, had hoped their issues would be solved by a planned takeover by American group KAM Sports, which was announced in May - but that is yet to be completed.
Football Australia's First Instance Board (FIB), an independent body responsible for club licensing, met on Thursday.
A Football Australia (FA) spokesperson said the FIB had: "determined that Western United FC has failed to meet the criteria required to be granted an A-League license.
"As such Western United FC's license has been withdrawn, effective immediately.
"Western United FC can appeal this decision to the Appeals Body established under the regulations on certain grounds outlined in the regulations.
"This outcome, while regrettable, reflects Football Australia's ongoing commitment to upholding the integrity, stability, and fairness of competitions for all clubs, players, and stakeholders."
United responded on Friday, confirming they would immediately appeal the decision.
"Western United Football Club is bitterly disappointed by the decision taken by Football Australia (FA) and the First Instance Body (FIB) today," United said in a statement.
"The club will be exercising its right to appeal the decision immediately, with confidence of a positive outcome as the sale of the club and injection of capital from KAM Melbourne continues to progress.
"We wish to assure every single member, supporter and the broader Australian football public that we will fight for our club with the same spirit, belief and resilience that has defined us from the very beginning.Â
"We will continue to stand together as we have done in the face of adversity in the past, and we will exhaust every avenue to continue being able to represent our community with pride.
"As this is a regulatory process, the club will be making no further comment at this time."
Championship-winning coach and Socceroos great John Aloisi signed a new two-year deal in July.
It is also unclear what the decision means for players, who are receiving support from the players' union, Professional Footballers (the PFA).
United's men's players are in pre-season while it is the off-season for ALW players."We have communicated directly with all players affected by this decision and will continue to do so as this matter progresses," a PFA spokesperson said in a statement.
United have experienced a turbulent existence since they were granted an expansion licence in 2018 - beating several other bids - and entered the league ahead of the 2019-20 season.
Their bid was successful largely based on Western Melbourne Group's commitment to build a purpose-built stadium in Tarneit.
That project was delayed by several years, with the club playing games in Geelong, Ballarat, Footscray and Tasmania, before a far smaller training ground, Ironbark Fields, was constructed.
Despite the setbacks, Aloisi was able to lead the club to their first ALM championship in 2021-22 while the ALW team reached the grand final in their inaugural season the following year.
"We've been advised by Football Australia on the determination by FIB to withdraw Western United's conditional licence," APL executive chairman Stephen Conroy said in a statement.
"This is an FA, AFC and regulatory process, and we won't comment further until the regulatory process and any appeal has been completed."