A panel found Lord Rami Ranger had abused his power by targeting writer and campaigner Poonam Joshi.
Now the King has directed that his honour awarded for services to business and community cohesion should be "cancelled and annulled".
The announcement, made yesterday in the official London Gazette, comes only weeks after the Tories reinstated the peer's whip.
It is understood the Forfeiture Committee made the move after considering Lord Ranger's posts about Sikhs along with media comments about Pakistanis.
The committee is also believed to have considered the House of Lords Standards Commissioner's finding in June last year that the peer had bullied Ms Joshi in a series of tweets.
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