Tasmania's salmon farmers were in November granted an emergency permit to use florfenicol in a bid to deal with bacterial disease piscirickettsiosis.
The disease was responsible for the mass deaths of four million farmed salmon in early 2025.
The Australian Pesticides and Veterinary Medicines Authority on Thursday said the permit had been suspended based on an unacceptable risk of residue exposure to non-target species.
Testing published in February showed the antibiotic in parts of abalone, lobsters, bryozoans, urchins and whelk 10km away from the nearest fish pen where it had been used.
Some international export markets have zero tolerance for antibiotic residue.
Authority chief executive Scott Hansen said the suspension wasn't based on any data relating to risks to human or environmental health.
"Those detections in rock lobster, sea urchin, abalone, whelk were very low levels, well below the max residue limit that is set for florfenicol in most species around the world," he told ABC radio.
"(It was) very low level, but still present, and that creates a trade risk. It's against the trade criteria for which we have to consider any permit.
"All governments around the world have set a maximum residue limit, a tolerance level for the detection of florfenicol in food products."
The use of florfenicol at salmon farming leases in Tasmania's south prompted the closure of two commercial rock lobster fishery zones in November.
The Tasmania rock lobster industry is worth roughly $90 million per year to the state.
Mr Hansen said it was unclear why florfenicol was accumulating in some wild species but not others.
Salmon Tasmania, which represents the industry, said it would apply for a new permit later in 2026 to use the antibiotic again with measures to address the export-related issues.
The industry would have to prove it could mitigate trade risk, and ensure there were no risks to human and environmental health, for a new permit to be considered, Mr Hansen said.
Premier Jeremy Rockliff said the state government supported the salmon industry developing a plan and applying for a new permit.
The mass deaths prompted protests after globules of salmon washed up on nearby beaches.
Independent state MP Peter George said the authority's decision was a victory for common sense as the demands of multinational companies had taken precedent over marine life and other fishers.
The Greens and the Bob Brown Foundation want the Liberal state government to force salmon companies to destock pens to deal with the disease.
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