China's video game industry regulator the General Administration of Press and Publication (GAPP) and copyright watchdog issued a circular on Saturday prohibiting foreign investment in domestic online gaming operations through joint ventures, wholly owned enterprises and cooperatives.
The new directive also disallows foreign firms from indirectly influencing Chinese gaming firms through agreements or technology support.
China's online gaming market is one of the world's fastest growing, with sales expected to rise 30 to 50 percent this year to 24 billion yuan to 27 billion yuan ($3.5-4 billion) according to GAPP.
Chinese game developer NetEase.com won earlier this year the license to operate within China Activision Blizzard's blockbuster game, World of Warcraft.
Their tie-up ran into problems with regulators who were concerned about their joint venture for Blizzard to provide technical support to NetEase.
(Reporting by Melanie Lee; Editing by Ken Wills)