The book, published in 15 countries and boasting sales of a quarter of a million, purports to be an accurate account of the honour killing of Khuri's best friend, Dalia - a Muslim - who was murdered by her father because she fell in love with a Christian man.
Random House Australian managing director Margaret Seale said the book would be withdrawn from sale permanently and plans to publish its sequel, A Matter of Honour, would be abandoned.
"I think Forbidden Love is a great story and obviously we wouldn't have published it if it wasn't," Seale told Australia's ABC Radio.
"It's just very disappointing that we haven't had the evidence to prove to us that the allegations raised were incorrect."
Khuri, 43, claimed she left Jordan in the late 1990s when in fact she had emigrated from Amman and settled in the US with her family when she was three years old.
Jordanian women rights activists have been campaigning to convince their parliament to criminalise honour killings and related murders.