Countries wishing to host the tournament have until Sept. 30 to send in expressions of interest, it added.
Libya has endured weeks of recent chaos as the government struggles to control former rebel fractions who helped topple former leader Muammar Gaddafi in 2011.
Libya were originally scheduled to hold the Nations Cup in 2013 but because of the civil war swapped with 2017 hosts South Africa.
The oil-rich north African country had been planning to build 11 stadiums at a cost of $314 million, including a showpiece new 60,000-seater Austrian-built stadium on the site of a former military camp in Tripoli.
Benghazi and Misrata were also due for major stadiums.
Libya's government said last year it hoped the hosting of the Nations Cup would allow it to demonstrate that life had returned to normal in the country and encourage investors.
Former World Cup winner Franz Beckenbauer had accepted a role as an "ambassador" to help promote the tournament and the country and the former Spain coach Javier Clemente was hired to prepare their team for the tournament.
CAF's decision follows the visit of a delegation from the Libyan FA to CAF's headquarters in Cairo this week.
Libya also delayed the scheduled start of their new league season earlier this month because of the fighting while teams competing in international competitions in recent months have been holding home matches in neighbouring Tunisia.
CAF are due to decide the host countries for the 2019 and 2021 Nations Cup finals at a meeting in Addis Ababa on Sept. 20.
Algeria, Cameroon, Guinea, the Ivory Coast and Zambia are bidding.
A decision on Libya's replacement will be made next year.