Two unnamed sources close to the Trump administration confirmed US media reports that the 37-year-old White House aide had lost his security clearance.
The President and the White House refused to comment on the issue but insisted the decision would not impact on Mr Kushner’s role.
However, the move casts doubt on his the aide’s influence within the White House and ability to negotiate peace in the Middle East as he no longer has access to “top secret/sensitive compartmented information”.
He had access to the classified information for more than a year and had been operating with an interim clearance.
Chief of staff John Kelly ordered White House officials with interim clearances pending since before 1 June 2017 lose access to the secret information if they had not received permanent clearances by Friday.
Mr Kelly’s order was implemented, a White House official confirmed.
Mr Kushner, who is married to Ivanka Trump, has been given a leading role in trying to reach a peace deal between the Israelis and Palestinians.
He has also been a strong backer of Washington’s ongoing support for Israeli Prime Minister Benjamin Netanyahu’s government.
The move – reported by Politico and CNN last week – comes days before Mr Netanyahu is due to visit the White House.
Former US negotiator Aaron David Miller said the investor and real-estate developer now risked losing “credibility” with negotiators in the Middle East.
“They know you can’t be reading about them,” he said, adding: “You can’t possibly know what you don’t know.”
Mr Kelly has told Mr Kushner he has “full confidence in his ability to continue performing his duties in his foreign policy portfolio including overseeing our Israeli-Palestinian peace effort and serving as an integral part of our relationship with Mexico”.
He added: “Everyone in the White House is grateful for these valuable contributions to furthering the President’s agenda. There is no truth to any suggestion otherwise.”
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The downgrade in security clearance comes amid reports of at least four countries discussing how to take advantage of Mr Kushner’s complex business arrangements, finances and lack of foreign policy experience.
The Washington Post reported that current and former US officials familiar with intelligence reports said several nations were in talks but it was unclear if any had acted on the discussions.