The Government Order was issued by the public relations department on Wednesday night, said reports.
The decision comes following the CBI decision to freeze the bank accounts of firms owned by YS Jaganmohan Reddy.
The government had released advertisements worth Rs 130 crore to Sakshi newspaper since it began in Apr 2008 and also Rs 1.1 crore to television channel.
Sakshi channel also gets Central government advertisements through the Directorate of Advertising & Visual Publicity, said reports. It is not yet clear if the Centre will follow the same suit in the case.
Sources reveal that the YSR government released advertisements worth Rs 6 crore to Sakshi every month. It later came down to Rs 3 crore.
"We did not discriminate against Sakshi and issued advertisements post-YSR regime also," said a senior official.
"This is the most heinous act and tantamount to stifling media and press freedom. This is a concerted action undertaken by CBI and the state government," said YSR Congress party in a statement.