Castillo became the subject of controversy when Chile brought a claim to the Court of Arbitration for Sport (CAS) that he had been ineligible to play in World Cup qualifying matches because his true nationality was Colombian.
The claim was dismissed this month, but the disputes body still ruled that Ecuador would lose three points ahead of the 2026 World Cup qualifiers and was fined 100,000 Swiss francs ($106,000) for using "a document with false information".
The FEF described the CAS ruling as "incomprehensible" and said it feared receiving further fines.
"Faced with an arbitrary ruling by the CAS...and faced with the risk of once again suffering unfair sanctions, the Ecuadorian Football Federation is obliged not to include Byron Castillo in the final selection," the FEF said in a statement.
Ecuador has always denied that Castillo breached any rules and judges in the country have also ruled in the player's favour.
Castillo could not immediately be reached for comment.
"The process that we have had to go through as an institution has been easy for no one, and even less so for our player, who is part of this family," the FEF added.
Ecuador are in World Cup Group A alongside hosts Qatar, Senegal and the Netherlands. The team's first game is the tournament's opening match on Sunday against Qatar.
