A review by the Commonwealth Games Federation (CGF) expressed disappointment the information submitted by the South African city was a "significant departure" from undertakings provided in the original bid.
Durban was awarded the Games in 2015 as the only city to make a confirmed bid and it was to have been the first African host of the event.
Liverpool has expressed an interest in staging the event in 2022.
"In line with the mandate from members at the 2016 General Assembly, the CGF is actively exploring alternative options, including a potential replacement host," CGF president Louise Martin said.
"The CGF is fully confident and committed to delivering a successful Commonwealth Games for athletes and fans in 2022."
The federation would continue to have dialogue with South Africa and its sports committee and remained committed to holding a Games in Africa, Ms Martin said.
Durban was awarded the Games in September 2015 after Edmonton, Canada, withdrew, but last month South African sports minister Fikile Mbalula indicated financial constraints were causing problems.
"We gave it our best shot, but we can't go beyond. If the country says we don't have this money, we can't," he said at the time.
A statement from the CGF explained the rationale for its decision.
"The Commonwealth Games Federation has completed its review of the final information submitted by South Africa on 30th November, 2016 to determine whether their proposals for hosting the 2022 Commonwealth Games are consistent with their original bid commitments and the host city contract," it said.
"It is with disappointment that the detailed review has concluded that there is a significant departure from the undertakings provided in Durban's bid and as a result a number of key obligations and commitments in areas such as governance, venues, funding and risk management/assurance have not been met under the revised proposition."
Photo: PHOTOSPORT Durban 2022 Commonwealth Games emblem.