Al-Watan, owned by a member of the Al-Sabah ruling family, said on its website, which was still operating, that it had challenged the decision in court.
An urgent hearing had been set for Wednesday, it said.
The decision was issued late Monday by the ministry of commerce and industry, which said the newspaper had violated minimum capital requirements.
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Under Kuwaiti law, the commercial licences of companies with losses worth more than 75 percent of their capital are cancelled.
The ministry said in a statement Tuesday that it had applied the law on a number of companies after warning them to rectify their financial position.
The state minister for cabinet affairs, Sheikh Mohammad Abdullah al-Sabah, told reporters outside parliament Tuesday that the decision was "not politically motivated".
Al-Watan, one of the largest dailies in Kuwait, is owned by former oil minister Sheikh Ali Khalifa al-Sabah, a member of the ruling family, and it is managed by his son Sheikh Khalifa.
The newspaper has traditionally supported the government, except in the past two years when it adopted a tougher line.