The break came barely a day after the leader of the Polisario independence movement, Brahim Ghali, attended the swearing-in ceremony of Ruto as president in Nairobi.
The Algerian-backed Polisario Front wants an independent state in the Western Sahara, a vast stretch of mineral-rich desert which Morocco considers part of its own territory.
"Kenya rescinds its recognition of the SADR and initiates steps to wind down the entity's presence in the country," Ruto said on Twitter after meeting the Moroccan Foreign Minister Nasser Bourita.
Bourita had delivered a congratulatory message from Morocco's King Mohammed VI, Ruto said, adding that the two nations had agreed on improved ties "in areas of trade, agriculture, health, tourism, energy, among others."
"Kenya supports the United Nations framework as the exclusive mechanism to find a lasting solution of the dispute," Ruto said.
A former Spanish colony, Western Sahara sits on the western edge of the vast eponymous desert, stretching along the Atlantic coast.
When Spain withdrew in 1975, Morocco sent thousands of people across the border and claimed it was an integral part of its territory.
The following year the Polisario Front declared a Sahrawi Arab Democratic Republic (SADR), with support from Algeria and Libya, and demanded a referendum on self-determination.
Since then, 84 UN member states have recognized the SADR. The African Union recognizes the Sahrawi Arab Republic as a member.
But a stalemate ensued, and Morocco built razor-wire-topped concentric sand walls in the desert that still ring 80 percent of the territory that it controls.
Under a 1991 ceasefire, the UN, which considers the Western Sahara "a non-self-governing territory", deployed a peacekeeping mission.
The international community has long backed a referendum to be held to decide the territory's status.
But Morocco rejects any vote in which independence is an option, arguing that only granting autonomy is on the table for the sake of regional security.