The Football Conference board recommended the action after a meeting of member clubs, the league said on its website.
This month the former League club were suspended from the Conference after failing to fulfil two fixtures, the first after players refused to play in protest at not being paid and the second when unpaid local police refused to provide cover.
Last year the club went into administration and were given a 25-point penalty. They still face a winding-up order from the Government's Revenue and Customs department and were last week up for sale for one pound.
Chester, who reached the semi-finals of the League Cup in 1975 and who had a record crowd of over 20,000 at their former home Sealand Road, joined the old third division north in 1931 and were a Football League club until they were relegated to the Conference 10 years ago.
They won promotion back to League Two in 2004 but were relegated again last season. Their record in this season's Conference will be expunged.
Chester's expulsion came hours after League Two club Bournemouth were served with a winding-up order and Premier League club Portsmouth went into administration.
