Hockey Canada announced in brief a statement early Saturday that it was releasing the flashy forward to play in the Russian-based KHL during the NHL lockout.
Yakupov, the No. 1 pick by the Edmonton Oilers at this year's draft, was suspended earlier in the week after it was revealed he didn't secure a transfer card to join Neftekhimik Nizhnekamsk.
The International Ice Hockey Federation ruled he played illegally when he suited up for his hometown team in two games earlier this month.
Hockey Canada, which refused to sign off on Yakupov's transfer, and the Canadian Hockey League both believed he belonged with the Sarnia Sting of the Ontario Hockey League.
But Hockey Canada has since changed its tune.
"Hockey Canada and the Russian Ice Hockey Federation have announced that the OHL has determined that Yakupov had no independent legal advice when, at the age of 17 years old, he signed his contract with Sarnia," the Hockey Canada statement read. "His release goes into effect immediately."
Hockey Canada insisted earlier this week that it was simply acting on behalf of the OHL team. Yakupov spent the last two seasons with Sarnia and is said to have committed to the Sting through the 2012-13 season.
Rather than reporting to Sarnia when the Edmonton Oilers assigned his rights to the junior club on Sept. 15 prior to the NHL lockout, he boarded a plane for Russia.
Yakupov's case was unique because the 18-year-old Russian was drafted as a North American-based player. He signed an entry-level deal with the Oilers over the summer and those contracts include a clause that states junior-eligible players may only appear in the NHL or CHL.
Yakupov was a dominant force during his time in the OHL, scoring 80 goals and 170 points in 107 career games for the Sting. He was held without a point in his two games with Neftekhimik last week — appearances that caught the attention of administrators back in North America.