The decision was taken on the opening day of the two-day Executive Board meeting of the International Cricket Council (ICC) here, he said.
"It has been decided to remove Hair from the elite panel," the source said, adding a formal announcement will be made on Saturday.
"The Asian block comprising India, Pakistan, Sri Lanka and Bangladesh tabled a motion at the meeting that Hair be taken off the panel," he said.
"The motion was put to vote and was passed by a 7-3 majority.
"The four Asian nations plus South Africa, Zimbabwe and the West Indies voted against Hair. England, Australia and New Zealand wanted him to continue."
The Australian was at the centre of controversy during the infamous Oval Test between Pakistan and England in August when he accused Pakistani bowlers of ball-tampering and penalized them five runs.
Pakistan refused to take the field after tea on the fourth day in protest, forcing Hair and his colleague Billy Doctrove of the West Indies to award the match to England.
It was the first forfeited Test match in the 129-year history of Test cricket and led to Pakistan demanding that the ICC remove Hair from the panel.
An ICC inquiry conducted by chief match referee Ranjan Madugalle of Sri Lanka on September 28 cleared Pakistan captain Inzamam-ul-Haq of ball-tampering.
But the inquiry found Inzamam guilty of bringing the game into disrepute for forfeiting the Test, and banned him for four one-day internationals.
The ICC revealed that Hair had offered to quit the panel after the Oval Test fiasco if he was paid a sum of $500,000, an offer the governing body refused to entertain.
The ICC also did not include Hair in the panel for the ongoing Champions Trophy tournament in India, saying it was doing this for "safety and security reasons."
Hair, a 56-year-old veteran of 76 Tests, courted controversy earlier in his career when he no-balled Sri Lankan spinner Muttiah Muralitharan for throwing during a tour of Australia in 1995-96.
The umpire angered Sri Lankan cricket administrators by terming Muralitharan's bowling action 'diabolical' in his autobiography.