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The decision was taken at the national executive committee meeting yesterday in the absence of Malema, when they discussed their president's recent suspension after he had labelled ANC president Jacob Zuma a dictator.
In a statement released by general secretary Sindiso Magaqa yesterday the league said: "The (Youth League) NEC agreed that (Malema) should continue participating as a president of the ANC Youth League and perform all his functions as president, because the decision to temporarily suspend him has not been officially communicated to the ANCYL as a structure of the ANC."
Magaqa said the NEC had a strong conviction that "we were elected by the 24th National Congress in the Gallagher Convention Centre as a collective and the president of the ANCYL will never be removed by a process that did not include the participation and voice of the ANC Youth League membership and league structures".
He said a national general council will be convened soon to deliberate with branches on the recent developments in the ANC.
He said the league would again request a meeting with the leadership of the ANC to find a political solution.
Speculation has been rife since late last month that the disbandment was eminent.
ANCYL deputy provincial secretary Nkhensani Kubayi said the decision was taken last week but branches were officially informed yesterday.
The region is known to be staunch supporters of Malema.
The region embarrassed ANCYL Gauteng chairman Lebogang Maile in his bid to oust Malema at last year's elective congress in June.
Johannesburg region rejected Maile's attempt to become president of the young lions outright - a move that surprised his supporters since Johannesburg was believed to be his power base.
Kubayi said: "The Johannesburg region was disbanded because of anarchy in its structures. They displayed a lack of respect for their senior structures and had started displaying foreign tendencies."
She said the region was launching branches at night with 20 people in attendance and were defying and disrespecting the provincial executive.
But Johannesburg secretary Percy Ntsolo hit back saying: "We respect the decision by the provincial executive but we are appealing to the national executive committee. We have already written to the office of the secretary-general.
"We have done nothing wrong, even when you look at the constitution of the league. Why are they disbanding us two weeks away from our conference?" Ntsolo asked.
Other ANCYL Johannesburg region members said they felt that they were being being punished for not supporting Maile.
"It is payback time for the Maile supporters who want to keep him in power at the coming provincial conference," said an ANCYL Johannesburg leader.
Soweto, Roodepoort, Lenasia, Midrand, Orange Farm, Sandton and Alexandra are among the 75 branches of Johannesburg region in good standing. This is compared with only about 30 branches in Ekurhuleni.
Johannesburg region has a decisive say in the provincial congress set for August because it has the most delegates.