Fifa has stripped Indonesia of hosting rights for the Under-20 World Cup.
The decision follows the cancellation of the official draw for the tournament, which was due to be held in Bali last Friday.
The Football Association of Indonesia (PSSI) said Fifa was forced to cancel the draw after Bali's governor Wayan Koster refused to host the Israeli team.
The U20 World Cup is set to take place from 20 May to 11 June.
Indonesia does not have any formal diplomatic ties with Israel and recently protesters have held marches demanding Israel be stopped from competing in the tournament, in support of Palestine.
Indonesia were awarded hosting rights in 2019, before Israel qualified for the tournament. England's U20 team is also set to compete.
"Fifa has decided, due to the current circumstances, to remove Indonesia as the host of the Fifa U20 World Cup 2023," a Fifa statement said.
"A new host will be announced as soon as possible, with the dates of the tournament currently remaining unchanged. Potential sanctions against the PSSI may also be decided at a later stage."
Half an hour before Fifa's announcement, PSSI executive committee member Arya Sinulingga said he was "very pessimistic" about Indonesia keeping the hosting rights.
"If we make political requirements in sports, it'll always be like this. We will be exiled from the football ecosystem.
"It's very tough for all of us. We're headed into a calamity in sports. We have to separate football or sports and politics."
BBC Sport's Simon Stone
Fifa insists Indonesia was not ready to host the tournament and are threatening to take action. However, there was a growing feeling it had to be moved anyway given the tensions around Israel's qualification.
Criticism of Israel in the country and its policy towards Palestine has been growing after Bali's governor said he did not want them to play in his region and Friday's planned group stage draw was cancelled.
Fifa knew any decision to strip Indonesia of hosting rights would be hugely controversial but it was also aware it had to do everything to protect Israel's players against potential security threats.
With the 24-team tournament due to begin on 20 May, with Indonesia remaining involved, Fifa needs to come up with an alternative pretty quickly.