National Election Committee chairman Michael Hishin disqualified him because the mandatory six-month cooling-off period between military and civilian life has not lapsed.
"
Shaul Mofaz... will continue to be defence minister in the next government when I form it
"
Prime Minister Ariel Sharon
Mr Mofaz became defence minister last month - just weeks after completing a four-year period as the Israeli army's chief of staff.
Prime Minister Ariel Sharon's Likud party had put Mr Mofaz 12th on its list of candidates for the 28 January poll.
Mr Sharon has said Mr Mofaz - a staunch nationalist - is to remain in office regardless.
No cooling-off period is required to become a cabinet minister.
Promise
"Shaul Mofaz is an excellent defence minister," Mr Sharon said, responding to the ruling.
"He is continuing his term as defence minister in the current government and will continue to be defence minister in the next government when I form it."
Likud is widely expected to win the election.
Mr Mofaz succeeded Labour Party's Binyamin Ben-Eliezer in early November, after Labour pulled out of the national unity government.
Correspondents say Mr Sharon promised to keep Mr Mofaz as defence minister - whether or not he had a parliamentary seat - to secure his support during Likud's leadership battle between Mr Sharon and Binyamin Netanyahu in November.