The charges were laid after the controversial fast bowler criticised the Pakistan Cricket Board (PCB) for double standards in awarding the central contracts in January this year.
"The board has lost confidence in Shoaib Akhtar and therefore felt that his presence in the field was damaging to the Pakistan team, for Pakistan players and for the image of Pakistan cricket," PCB chairman Nasim Ashraf said.
However the PCB chief said that Akhtar would still be able to play for other teams around the world, clearing the fast bowler to play for the lucrative Indian Premier League next month.
Ashraf added that it was a “sad day for me and for Shoaib Akhtar. He is such a talented player."
The PCB chairman said Akhtar had the right to appeal the decision.
In October last year, Akhtar was fined 3.4 million rupees (52,000 dollars) and banned for 13 matches for hitting fellow paceman Mohammad Asif with a bat, just days before the start of the Twenty20 World Championships.
He was put on probation for two years following the incident.
Akhtar was dropped from Pakistan's list of 15 contracted players in January after the paceman had another disappointing year, plagued by injures and discipline problems.
Instead, Akhtar was offered a special retainer deal, which he refused to sign.
Akhtar played the last of his 46 Tests against India at Bangalore in December 2007 before breaking down due to back trouble.
He was blamed for Pakistan's 1-0 series loss to the archrivals and was not played in the team's one-day series against Zimbabwe in February this year.
Akhtar was also left out of a 16-man squad announced for next month's first two one-day internationals against Bangladesh.
Kaneria reprimanded: Spinner Danish Kaneria, who also faced a charge of criticising the PCB, was severely reprimanded, Ashraf said.
Kaneria had criticised his demotion from category 'B' to 'C' in the central contract in an online column. He later blamed a newspaper for publishing his column out of context.
"Since this was Kaneria's first offense on discipline, he has been severely reprimanded and barred from issuing any press statements," Ashraf said.
Akhtar's chequered career: Pakistani fast bowler Shoaib Akhtar, who was banned from playing in all forms of the sport after the disciplinary committee found the erratic pacer guilty of breaching PCB's code of conduct, has an uncanny knack of courting controversies. thatsCricket takes you on a ill-fated journey of Rawalpindi Express.
1996: Takes 25 wickets on the Pakistan A team's tour to England. Pakistan manager reports him for indiscipline and he is dropped from the Pakistan one-day squad going to Toronto for one-day series on the basis of report.
1997: Makes Test debut against West Indies at Rawalpindi returns with the match haul of 2 for 47.
1998: Makes the first major impact with 5 for 43 in first innings against South Africa at Durban to help his side notch Ist win in South Africa.
1999: Was a mixed bag for Akhtar. He had good year on the field and emerged leading wicket taker in the ICC World Cup in England. Joins Notts. However he ended the year on a bad note after being called for chucking in Australia by Peter Willey and Darrell Hair.
2000: Pakistan board fines him 50,000 rupees (431 pounds) for indiscipline on manager's report after tour of Australia.
2000: His bowling action was cleared but was sidelined throughout the season (Pak and County) for a horde of injuries he suffered.
2001: Shoaib returns to Pak side, after a long lay-off of ten months, with a 5-for performance against New Zealand. In the ensuing series he was once again called but this time it was Kiwi umpires Steve Dunn and Doug Cowie. However he was cleared, thanks to the report from Western Australia University which concluded that his action is the result of combination of unique physical charcterstics.
2003: Dropped from Pakistan team after World Cup and PCB Chairman tells him his career is finished if he does not improve his behaviour and discipline. Recalled for a triangular series in Sri Lanka and was handed one-match ban after found guilty of ball-tampering. Elevated to vice-captaincy for Tests against South Africa. Banned for one test and two ODIs for abusing Paul Adams in the first Test in Lahore.
2004 Disciplined by match referees in Australia for rude gestures against Australian batsmen in the Tests.
2006 Banned for two years after testing positive for the banned substance nandrolone in an internal drugs test carried out by the PCB. A three-man appeals tribunal later clears him of doping offences. Akhtar slapped coach Woolmer in team hotel during ICC Champions Trophy, claimed a laison officer attached to the team.
2007 Has a dressing room spat with coach Bob Woolmer during the second test at Port Elizabeth against South Africa caught by television screens. Withdrawn from Pakistan's World Cup squad just hours before the team prepares to fly out to the West Indies.
2007: In August he is fined 300,000 rupees by the team manager and board for leaving a training camp in Karachi. However PCB appeals committee gave him clean chit later.
2008: PCB committee held Akhtar responsable for Pak's dismal show during 2007-08 away series in India. And Akhtar was denied central contract with PCB.
2008: PCB imposed a media gag on Akhtar after the express bowler lambasted PCB in the media for not handing him central contract. Pindi Express criticised PCB for double standards in awarding contracts.
Apr 1 2008: Akhtar was banned for five years...
thatsCricket (with inputs from Agencies)