FIFA has banned Peru from international competition, a leading official at the South American Football Confederation (CSF) said.
Sepp Blatter, president of world soccer's ruling body, warned last week Peru had until Monday to end a long-running feud between their football federation (FPF) and government or face an immediate international ban.
"FIFA has suspended Peru from all activity," CSF secretary general Eduardo de Luca told reporters at his organisation's headquarters in the Paraguayan capital on Monday.
The announcement marked a new low for Peruvian football which has been in steady decline since reaching its heyday during the 1970s.
The Peruvian government's Institute of Sports (IPD) does not recognise FPF president Manuel Burga, claiming his election was irregular.
"If Burga's position is going to remain the same as before ... this is a dialogue of the deaf," IPD president Arturo Woodman told Reuters in Lima.
"There is absolutely no intervention by the government. What there is, is respect for Peruvian law. He (Burga) cannot be a director."
Burga said: "I want to apologise for the Peruvian people for the situation which we are going through.
"The principal problem is that the Peruvian law is not compatible with the FIFA statutes, and so anyone who was in my place would be in the same situation."
De Luca said FIFA would deal with Peru's membership at its next executive committee meeting in Tokyo next month but added the CSF was confident the row could be resolved.
Peru have already been stripped of the right to host next year's South American under-20 championship because of the dispute.
The participation of Peru in the 2010 World Cup qualifiers, which are just past the halfway stage in South America, is now in doubt as are their entries for the Libertadores Cup, the region's European Champions League equivalent.
When the draw is made on Tuesday for the 2009 Libertadores there will be blanks where Peruvian club names would normally be placed, de Luca said.
Peru, who have not reached the World Cup finals since 1982, are bottom of the 10-nation South American group with seven points from 10 matches. Their next qualifier is not until March.
FIFA, which prohibits government intervention in football affairs, was not immediately available for comment.
The dispute has caused an outcry in Peru where the public and media are already exasperated at the failings of the national side.
Peru banned four leading players last year, including strikers Claudio Pizarro and Jefferson Farfan, for alleged indiscipline at the team hotel following a match.
Pizarro and Farfan, who denied the claims, later had their suspensions reduced but have not been recalled by coach Jose Del Solar.
Peruvian players are often accused of indiscipline but in turn complain of harassment by the country's tabloid newspapers and television stations.