The state executive voted unanimously on Friday evening to disendorse Moira Deeming as a candidate at the November election.
It came after Mrs Deeming failed to apologise after making unsubstantiated allegations against fellow MP Matthew Guy over an incident in May.
Election analyst and blogger Ben Raue said the ruction was undesirable but unlikely to cause a major electoral headwind for the party come November.
"In terms of the direct electoral impact, I'm sceptical," the Tally Room founder told AAP.
The fact the decision to disendorse Mrs Deeming was unanimous, he said, should end suggestions the episode underscored deep internal divisions.
"(Opposition Leader Jess Wilson) seems to have the party behind her," he said.
More important is whether the party can convince the electorate it is ready to govern, after 12 years of Labor.
"People might find it hard to imagine what a coalition government in Victoria actually looks like," Mr Raue said.
"It's a bit of a natural Labor state, coalition governments are a bit of an aberration."
Mrs Deeming will serve out the remainder of her term as the representative for the Western Metropolitan region but will not be allowed to recontest under the Liberal banner.
Ms Wilson issued a statement confirming the outcome of Friday's meeting within 20 minutes of its scheduled start time of 5.30pm.
"This matter is now concluded," she said.
"My singular focus remains on the issues that matter to Victorians and outlining our plan to deliver a fresh start this November."
A statement released under the party's letterhead thanked Mrs Deeming for her service.
Mrs Deeming earlier in the week withdrew a legal challenge seeking to prevent the party from moving against her, clearing a path for Friday's vote.
It came after the MP accused colleague and former party leader Matthew Guy of grabbing her "violently" in a headlock, but since claimed she misunderstood the meaning of headlock.
Vision obtained by AAP from a function in May showed Mr Guy placing his hand on Mrs Deeming's upper back as they lean in to talk to one another.
Mr Guy told reporters in June Mrs Deeming owed him a public apology, adding he vehemently denied that anything untoward took place.
Tensions within the party have simmered since a crushing defeat at the 2022 election, spilling into a defamation lawsuit by Mrs Deeming against former leader John Pesutto.
The opposition is hoping to turf out a three-term Labor government and fend off an insurgent One Nation, which is yet to anoint a state leader.
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