The CBI is seeking to have its registration as a supporter of a No vote in the independence referendum declared null and void, with its director general saying it had made an "honest mistake".
John Cridland said the application to register "should not have been made", as it had not been approved by the CBI board and was not signed by an authorised signatory.
He added that the business lobby organisation had now contacted the Electoral Commission in a bid to " deregister our position".
It comes just over a week after it was revealed the body had registered with the Commission to formally back a No vote in the Scottish independence referendum.
At the time a CBI spokesman said it had done so "in accordance with the law".
But the move sparked a backlash that saw 18 bodies - including several Scottish universities, the BBC and broadcaster STV - either resign or suspend their membership of the CBI.
Mr Cridland said registering with the Electoral Commission had "triggered something none of us expected".
The organisation - whose members include 1,200 business that are registered and operating in Scotland - has now conducted a review of the situation and taken legal advice from a QC on the matter which concluded "it was never a valid application", Mr Cridland said.
He stated: " We are working closely with the Electoral Commission and have asked them to accept our legal team's advice and nullify our application with immediate effect."
He said the decision to register had been "dealt with as a compliance issue, but an honest mistake was made because it was dealt with at officer level".
Mr Cridland told how prior to registration there had been discussions between the Ele ctoral Commission and officers at the CBI's London headquarters about the issue, saying: " A view was taken at an operational compliance level that the right thing to do was to register, but clearly it was a much bigger issue.
"I wasn't aware registration had taken place until Good Friday, this had not been approved by the CBI board, we hadn't taken legal advice.
"It was an honest mistake. We've made a mistake and we're putting up our hands.
"We're seeking to deregister so the CBI can go back to its normal business - jobs, growth and investment in Scotland."
Mr Cridland added: " It's vital that the CBI does the right thing and we need to restore the CBI's impartiality.
"To do that, as soon as I became aware of the situation I commissioned this legal advice and review that has come to the conclusion we should seek to deregister our position, and we have made representation to the Electoral Commission."
He conceded: "It was poor corporate governance and process. But i t was never a valid application, we have Queen's Counsel advice to that effect."
Mr Cridland stressed: "The CBI is politically independent and impartial. Although the decision to register with the Electoral Commission was taken in good faith, in order to carry out normal activities during the referendum period, it has inadvertently given the impression that the CBI is a political entity - we are not and never will be."
He added it had "not been the easiest of weeks for the CBI" as he said: " The biggest issue for the CBI this week has been the questioning of our impartiality.
"The CBI has been doing its job for nearly 50 years in representing business, we're an organisation with a Royal Charter. We're not a political entity, we're not an organisation that campaigns to influence people's votes and it's really important we maintain our political independence."
He continued: " We have always said that the referendum is a decision for the Scottish people and we're not telling people how to vote.
"However, we do have a legitimate role as the UK's biggest business group in raising important questions on the big issues affecting businesses, jobs and growth, which we will continue to do.
"Registration has raised a question as to whether we have changed the CBI's role - we have not and that was never the purpose of registering."
Mr Cridland said he regretted that a number of organisations had withdrawn from the CBI as a result of the registration.
"I regret that they left and I hope the position can be resolved," he said.
He also stressed: "We have also given a firm assurance to the Commission that during the regulated period the CBI will not carry out any activities that fall within the terms of the regulations. This includes campaign broadcasts, sending unsolicited material to voters or holding any referendum-specific press conferences."
An Electoral Commission spokesman said: " We have received representations from the CBI to deregister. We are currently considering whether this is possible under the relevant legislation and will make our reasoning public when we have reached a conclusion and informed the CBI of our decision."
Tony Banks, chairman of the pro-independence Business for Scotland organisation, said the CBI had "descended from farce into shambles".
He said: "Having created the biggest crisis in the CBI organisation's history and turned it into a public laughing stock, this means that on both sides of the border, no private or public member of the CBI can now credibly remain within the organisation if they wish to be deemed as neutral in the Scottish referendum.
"Our understanding is that the CBI cannot nullify its Electoral Commission registration and must, having been identified as a campaigning organisation, be policed by the Commission during the referendum campaign period, just as we ourselves will be.
A spokesman for Better Together said: "The Electoral Commission must urgently provide clear advice to organisations on whether or not they should register. Whether it's business, civil society, or nationalist organisations like Business for Scotland, there should be clarity about registration.
"There are two choices for organisations wishing to campaign in the referendum. They can be totally separate campaigns which do not work with the official umbrella Yes Scotland or Better Together organisations.
"Alternatively they can be recognised as a part of one of the two umbrella groups and everything they spend must come off the legally enforced spending limits of Yes Scotland and Better Together. These rules exist to stop front organisations being used to spend more than the legally enforced spending limit.
"If groups are required to register then they should do so immediately. Either way there can be no room for doubt on this."