The Benfica star came to blows with Katanec after the coach substituted the star midfielder during a 3-1 defeat to Spain in their World Cup debut match last Sunday.
Katanec said afterwards that he would resign once the tournament was over.
Slovenian Football Federation (FAS) president Rudy Zavru then tried to smooth over the affair, while Zahovic apologised on Wednesday and withdrew his criticism of his coach.
However on Thursday, team officials announced that 31-year-old Zahovic had been expelled from the squad.
"I can confirm that Zahovic is being sent home. We have no further comment to make at this stage," said Slovenia team spokesman Rok Sinkovc.
In an official statement, the FAS said that having initially decided to keep Zahovic in the squad "for the good of the team", his behaviour had to be sanctioned in the strongest possible way.
"In spite of numerous violations of the agreement which was supposed to assure the normal conditions for the next matches, the leadership first decided to keep him in the squad, aiming for the best result of the team," the association said.
"He repeated the incorrect statements in a public statement after the practice on 5 June, where he represented himself as a victim although he is the only one to blame for the current situation.
"He described the incident incorrectly, insulted the head coach and abused the trust of the players again."
Zahovic appeared calm as he left the team hotel.
"I'm leaving now, I think there will be no more problems," he told Slovenian television.
"This is the best solution ahead of the remaining matches at the World Cup."