The licensee of Dubai Café on London Road was prosecuted three times, most recently in April this year, for allowing customers to puff away inside.
A damning council report also revealed fears about a potentially hazardous gas burner and electrical wiring at the premises, which it revealed is being probed by police over the alleged theft of electricity.
And a council officer voiced concerns about the lack of measures in place to prevent children from accessing the venue, though no underage customers had been seen inside during inspections.
Sheffield Council's licensing sub-committee voted to revoke the licence, and committee members said they 'strongly encouraged a joint visit to the landlords by the responsible authorities'.
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The meeting took place on November 30 but the ruling was only this week published by the council.
The council claimed the premises had been illegally operating as a shisha bar since opening in 2011.
Sean Gibbons, from the council's health and safety enforcement team, said the owners were not 'fit and proper' as they showed 'blatant disregard' for legislation.