The Therapeutic Goods Administration (TGA) said Australia was the first country to withdraw the drug, which is in the same class of pharmaceuticals as Vioxx, withdrawn by manufacturer Merck in 2004.
Technically called lumiracoxib, Prexige is produced by the Switzerland-based company Novartis AG, which said it had contacted health authorities in 50 countries where the drug is sold about the withdrawal.
The move followed a review of eight cases where people suffered severe liver damage after using the drug. Two of those people died and another two required liver transplants.
"As a result of those case reports we have taken this straight to our drug safety committee who met yesterday," said Rohan Hammett, the TGA's principal medical adviser.
"They recommended that it immediately be deregistered."
Australia was the first country to recall the drug, Hammett said.
Prexige is taken by about 60,000 people in Australia and is prescribed for osteoarthritis, post-operative pain, pain related to dental procedures and painful menstruation.
The TGA has recommended people taking Prexige seek an alternative medication and have liver function blood tests. It is a non-steroidal anti-inflammatory drug, technically called a Cox-2 inhibitor.
Another Cox-2 inhibitor, Vioxx or Rofecoxib, was voluntarily recalled by manufacturer Merck in 2004 due to adverse health conditions in patients taking it.
"Regulators around the world have been watching this class of drugs very closely since Vioxx and hence we've acted very quickly," Hammett said.
Novartis said it supported the decision.
"Cleary, patient safety is of the utmost importance," said Nick Kurstjens, the company's chief scientific officer for Australia.