Inzamam was due to captain Pakistan in this month's tournament in India but he picked up a four-match one-day international ban at a hearing in London last week for bringing the game into disrepute.
The skipper was held responsible for his team's refusal to play in the fourth Test against England at The Oval in August, but was cleared of the ball-tampering charges that led Pakistan to protest.
Under ICC regulations, teams are only allowed to replace injured players in their confirmed 14-man squads, but PCB official Saleem Altaf told Reuters today the authority had given Pakistan permission to call up Faisal.
''Faisal has been selected to play in the Champions Trophy as he has been with the team for a while now, and was also in the 30-member provisional list we sent to the ICC,'' Altaf said.
The 24-year-old Iqbal has played 17 Tests and 17 one-day internationals and was a member of the team that toured England.
Younis Khan will lead the side in Inzamam's absence.
Pakistan coach Bob Woolmer is confident his players will be able to regroup and focus on a tournament they have never won at a three-day conditioning camp in Lahore.
''Losing Inzamam is a big setback as he is such an experienced player and top class batsman,'' the former England player said.
''But his absence can't be helped and I would be hoping the boys will put everything behind them and try to do their best.''