A letter reversing the decision was sent by Rajasthan CM Vasundhara Raje to commerce and industry minister Anand Sharma.
A top Rajasthan state official confirmed that the letter withdrawing FDI permission had been written to Sharma.
"The ministry has received the letter," an official said. Rajasthan has become the second state, after Delhi, to withdraw approval for FDI in multi-brand retail following a change of government after the assembly elections held in November-December. The Congress lost to the Bharatiya Janata Party in Rajasthan and to the Aam Aadmi Party in Delhi.
Twelve states, mostly Congress-led, had agreed to allow global retailers to open supermarket chains. The other states include Maharashtra, Karnataka and Andhra Pradesh.
Former Rajasthan state CM Ashok Gehlot had agreed to implement the policy in the state.
The central government permitted 51% FDI in multi-brand retail trading in September 2012 and left its implementation to the states.
So far, only UK-based Tesco's proposal to invest in the sector has been cleared by the central government.