The Delhi government will appeal the decision on Monday.
Doctors have declared a public health emergency and more than 30,000 schools across north India have closed, though classes are scheduled to resume on Monday.
Air quality typically worsens before the onset of winter as cooler air traps pollutants near the ground and prevents them from dispersing into the atmosphere, a phenomenon known as inversion.
The meteorological department today said more foggy weather was expected in coming days, and rain forecast for Wednesday would do little to clear the skies.
"It may help subside the smog a little. But it will be light rain, drizzle, not heavy showers. So, maybe it might not help that much," Mrutyunjay Mohapatra, additional director general of meteorology, told news agency AFP.
United Airlines has suspended all flights to Delhi from Newark until Monday due to the air quality and was offering alternatives to passengers booked on the route to India, the US airline said on its website.
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