Ning had been sent back to his Chinese Navy team for training, Xinhua said, citing the Chinese swimming authority.
"Ning Zetao violated the rules of the national swimming team which has resulted in adverse effect on the team," said a statement from the Swimming Management Centre of the General Administration of Sport of China.
"Everyone is equal and should abide by rules in sports," said the statement, adding that the decision was made last October by the Chinese national swimming team.
It also said Ning had refused to comply with the team's competition assignment, and declined to take part in an Olympic qualifying relay event which caused the Chinese men's team to miss the 4x200m freestyle relay at the Rio Games.
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Reuters was not immediately able to reach Ning for comment.
In 2015, the 23-year-old from China's heartland province of Henan became the first Asian swimmer to win the 100 meters freestyle at the world championships. Thanks to his boyish good looks, he is a household name in China and goes by the nicknames "Baozi," or "steamed bun".
He had been the subject of social media reports last year which speculated that he was due to be cut from the Rio Olympics team because he was undertaking too many commercial engagements.
He eventually competed but only managed a 12th place finish in the men's 100 freestyle and 30th place in the 50 freestyle.
(Reporting by Brenda Goh; Editing by Peter Rutherford)
