The move will take effect at 17:00 Jakarta time (10:00 GMT).
The country's government says the regulations are aimed to help protect local physical and online retailers.
Indonesia was the first country to pilot the app's e-commerce service in 2021 and became one of the biggest markets for TikTok Shop.
Last week, Indonesia announced regulations that would force TikTok to split its shopping feature from the popular video sharing service in the country.
Announcing the measures, Indonesia's trade minister Zulkifli Hasan said: "Now, e-commerce cannot become social media. It is separated."
He also told social media platforms they had a week to comply with the new rules or risk losing their licence to operate in the country.
The announcement came after Indonesia's President Joko Widodo said last month: "We need to be careful with e-commerce. It can be very good if there are regulations but can turn bad if there aren't any regulations."
"Our priority is to remain compliant with local laws and regulations," TikTok said in a statement on Tuesday.
"As such, we will no longer facilitate e-commerce transactions in TikTok Shop Indonesia," it added.
Online retailing in Indonesia has soared in recent years. The value of e-commerce sales will have increased more than sixfold between 2018 and next year to hit 689 trillion Indonesian rupiah ($44bn; £36.5bn), according to the country's central bank.
TikTok Shop had been growing its market share since its launch two years ago into Indonesia's online shopping market, which is dominated by platforms such as Tokopedia, Shopee and Lazada.
The country of more than 278 million people is home to 125 million TikTok users. That includes 6 million sellers and millions more creators who earn money using TikTok Shop to promote goods.
In June, the company's chief executive Shou Zi Chew visited Indonesia, pledging to invest billions of dollars in the region over the next three to five years.
The growth of online retailers has had a major impact on the owners of physical shops such as Sukmamalingga, who has had a store selling Muslim clothing such as kaftans at Tanah Abang Market in Jakarta for nine years.
"None of my customers from regions in Indonesia shop anymore, even though I often send photos of new models of clothes," he told BBC News Indonesia.
Government figures show there are more than 64 million smaller businesses - known as micro, small and medium enterprises - which account for almost two-thirds of Indonesia's economy.
The new regulations are another setback for TikTok, which has come scrutiny under in the US, European Union and the UK, where Parliament has banned the app from its network over security concerns.
-- Courtesy of BBC News