The row, which has been going on for several months within the United States of America Cricket Association, saw the two factions battling for control unable to agree on a unified team to take part in what is the only multi-day tournament for teams outside the Test elite.
In a statement Monday, the ICC said it had invited the Cayman Islands, as the next highest ranked country in the region, to replace the USA.
Along with Canada and Bermuda, they will contest the Americas section of the tournament which starts later this month.
"It is now clear that agreement has not been reached on a team to represent USA in the forthcoming ICC Intercontinental Cup," ICC chief executive Malcolm Speed wrote in a letter to the USACA made public on Monday.
"ICC has been extremely patient in seeking to enable the two parties to agree on a team. It is very disappointing for all concerned that you have not been able to agree on the final composition of the team," the Australian head of cricket's world governing body added.
"We are not able to wait any longer as it is necessary to finalise details of the competing teams," he added.
"Accordingly, please be advised that the invitation to USA to take part in the ICC Intercontinental Cup for 2005 is withdrawn with immediate effect."
The letter added: "Neither party should see this outcome as a victory. Regrettably, the game of cricket in the USA and the cricketers who seek to play cricket for USA at the highest level are again the losers."
Developing cricket in the United States has long been a goal of cricket administrators who have been enticed by the potential commercial benefits in a country which is home to millions of immigrants from established cricket-playing nations.
But the team itself has struggled when exposed to top-class competition and at last year's Champions Trophy in England the United States suffered a 210-run thrashing by New Zealand before losing in equally lopsided fashion to world champions Australia by nine wickets.
However, there had been hopes for a group of younger players coming through who are now set to miss out on what would have been a valuable experience.