The move was widely expected after Gov. Jerry Brown in September signed a bill authorizing a state takeover of the system.
The State Water Resources Control Board issued its official order Wednesday dissolving the district and authorizing Los Angeles County to take over its operations.
Sativa serves a customer base of about 6,800 people with 1,643 service connections. Residents of Compton and Willowbrook in the district have complained for months about tap water which is discolored and has an odor.
District and state officials say tests did not show any signs of bacteria or serious health risks in the discolored water, but residents remained skeptical.
The document ordering the shutdown of Sativa chronicles a series of violations of state regulations and orders dating back more than 30 years, including failures to follow proper procedures for monitoring and testing the water and an inability to provide enough water pressure for firefighting.