The powerful election body said his star campaigner status was being revoked for "repeated violation of model code of conduct" and for "complete disregard" of warnings to him.
The commission said Kamal Nath, being a leader of a political party, had repeatedly "breached ethical and dignified behaviour".
If the former chief minister campaigns, the cost of his travel, stay and everything else will be completely paid by the candidate.
Kamal Nath had earlier been warned by the Election Commission after he used the word "item" for a woman BJP candidate who was among the 22 MLAs whose exit led to the collapse of his government in March.
Campaigning in Dabra, he had mocked BJP's Imarti Devi, saying the Congress candidate was a "simple person" unlike his rival, who was an "item".
In a notice, the poll panel had told the senior Congress leader: "The Commission hereby advises Kamal Nath, ex-chief minister Madhya Pradesh that while making public utterances he should not use any such word or statement during the period of Model Code of Conduct."
The veteran was subsequently accused of making another provocative comment.
On October 13, Kamal Nath said at a rally that Chief Minister Shivraj Singh Chouhan is a "nautanki kalakar and should act in films in Mumbai". He had also said: "Aapke Bhagwan toh woh mafia hai jisse aapne Madhya Pradesh ki pehchaan banai. Aapke bhagwan toh milawat-khor hain (your god is a mafia)."
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