The Civil Aviation Authority of Pakistan has suspended Bhoja Air's air operator's certificate.
The airline has only one aircraft in operation and therefore did not meet the AOC requirement of having three aircraft in an airworthy state, says its spokesman.
He did not want to say which aircraft type met the requirement and which aircraft have been grounded.
Flightglobal's ACAS database shows that Bhoja Air has a fleet of one Boeing 737-200, one Boeing 737-400 and one McDonnell Douglas DC-9-32.
Bhoja's suspension will be lifted once the airline meets the requirement, says the spokesman.
The move comes after a Bhoja 737-200 aircraft crashed near Islamabad on 20 April, killing all 121 passengers and six crew members on board.
The spokesman says that the investigators have decoded the cockpit voice and flight data recorders. The results of the investigation will be submitted to the government once it is completed, he adds.