The picture agency explained its decision by saying Elisabeth Ohlson Wallin's work risked damaging their photographers' credibility, reported Sveriges Televison (SVT).
"Therefore I must put a stop to all future pictures that you want to buy from Scanpix to use in montages," the agency's sales director told Ohlson Wallin in an email.
Scanpix is Scandinavia's biggest editorial image bureau.
When the montage first appeared, there were discussions about whether it could be considered libellous to members of the royal family.
"I understand that the royal family felt the need to put their foot down, but I have no intention of issuing a formal apology or retracting the picture," the artist told The Local in October.
“Artists have always done collages,” Ohlson Wallin told SVT as news of the Scanpix ban surfaced on Tuesday.
“What are we supposed to do now? Steal pictures and risk being sued? I think this issue needs to be taken seriously.”
Other artists also use photojournalistic images as part of their work. For example, Scottish artist David Mach uses cut out images to physically craft his giant collages.
In Sweden, Ohlson Wallin's collage also sparked discussion about copyright, although several Swedish artists leapt to Ohlson Wallin's defence, citing the principle of “verkshöjd” that protects derivative work if it is deemed original enough to constitute a work of art.
Similar legislation exists in many countries, including the US where it is called “fair use” and overrules some copyright.
A famous case saw legendary news photographer Susan Meiselas send a "cease-and-desist" note to painter Joy Garnett over a painting that Meiselas considered too close to her original photo to quality as fair use.
The artist retracted the image but an online coup by fellow artists saw Meiselas' image reproduced over and over in different interpretations.
Scanpix denied being hostile to art and defended its decision when contacted by SVT.
"I wouldn't say this makes satirical work impossible but of course it could have some effect," sales chief Johan Emtefall said.
"But we can't have her satire work affect our relationship with the people we photograph."
The artist remained critical.
"I had planned three more images, now I can't complete them," Ohlson Wallin told SVT.