India ordered the US embassy to cease commercial activities benefiting non-diplomats by January 16, as this violates "local tax laws and also the Vienna Convention".
The club at the US embassy is a popular facility for American citizens living in New Delhi, RT reported.
The ban stipulates shutting down a club, including a restaurant, bar, swimming pool, a bowling alley, a tennis court and other facilities.
The move comes after the Indian deputy consul general was arrested in New York in a visa fraud case on December 13.
Currently released on bail, Devyani Khobragade is due in court on January 13. She could face a maximum sentence of 10 years if convicted.