The development comes a week after India banned 118 apps, including the popular multiplayer game PUBG MOBILE.
"In light of recent developments, PUBG Corporation has made the decision to no longer authorise the PUBG MOBILE franchise to Tencent Games in India. Moving forward, PUBG Corporation will take on all publishing responsibilities within the country," a statement said.
PUBG Corporation said it fully understands and respects the measures taken by the Indian government as "privacy and security of player data is a top priority for the company".
There was no immediate comments from Tencent.
The gaming firm also expressed hope to work "hand-in-hand with the Indian government to find a solution that will allow gamers to once again drop into the battlegrounds while being fully compliant with Indian laws and regulations".
PUBG MOBILE is the mobile version of PlayerUnknown's Battlegrounds (PUBG), an intellectual property owned and developed by PUBG Corporation.
According to reports, India accounts for a significant portion of PUBG MOBILE's download and usage.
Last week, the government blocked 118 mobile applications, including PUBG MOBILE, terming them prejudicial to the sovereignty, integrity and defence of the nation. This was in addition to the 59 apps with Chinese links that were banned in June on similar grounds.
Interestingly, Bengaluru-based nCore Games has announced the launch FAU:G -- a multiplayer action game that has been developed under the mentorship of Bollywood actor Akshay Kumar -- just days after the government banned PUBG MOBILE.
FAU:G, which stands for 'Fearless and United: Guards' will be launched at the end of October and the first level will be set in the Galwan Valley backdrop, followed by third person shooting gameplay in the subsequent releases.