The 51-year-old, who played for the Ibrox side between 1995 and 1998, was due to be honoured at a dinner later this month, but the decision has been reversed.
Reports on Thursday morning suggested that members of the Scottish FA board were planning to boycott the ceremony if Gascoigne was inducted, citing previous instances of domestic abuse, racism and sectarianism.
Scottish football’s governing body has no say on nominations to the Hall of Fame. Inductees are chosen by a panel comprising football and media personalities, and are chosen from nominations by the general public.
Gascoigne’s contribution to the Scottish game was due to be celebrated at the Scottish Football Hall of Fame Dinner on Sunday October 21 at Hampden Park.
Women’s football legend Julie Fleeting - Scotland’s leading goalscorer in the women’s game - has already been confirmed as one of the new entrants, while three additional inductees will be named on the night.
But the Scottish Football Hall of Fame confirmed late on Thursday that Gascoigne’s nomination had been withdrawn, citing a “number of factors” including the former player’s health.
A statement read: “Further to consultation with the Chair and members of the Scottish Football Hall of Fame committee, due to a number of factors including ongoing enquiries, and concerns over the state of Paul’s health, it has been decided to withdraw the nomination of Paul Gascoigne at the time from this year’s nomination process.”
Gascoigne played 104 times for Rangers in all competitions, scoring 39 times.
He was capped 57 times by England and also had spells with Newcastle, Tottenham Hotspur, Lazio, Middlesbrough, Everton, Burnley and Chinese club Gansu Tianma in a career spanning nearly 20 years.