The news was initially announced by developer Undead Labs on the game's official forums, and was later confirmed by the Australian Classification Board and the game's publisher, Microsoft.
The Australian Classification Board ruled that the game was refused classification on the grounds that it contains "illicit or proscribed drug use related to incentives or rewards".
State of Decay's in-game medications consist of both legal and illicit substances, including "methadone, morphine, amphetamines, stimulants, acetaminophen, ibuprofen, codeine, aspirin, 'trucker pills', painkillers, and tussin."
The board's decision report states, "The game enables the player's character to self-administer proscribed drugs which aid in gameplay progression. This game therefore contains drug use related to incentives or rewards, and should be refused classification."
A Microsoft representative told GameSpot that the publisher is "currently evaluating the options with regards to the title’s classification".
"Microsoft operates within the legal requirements of the Australian Classification Board when it comes to the rating of all its first-party gaming titles, and agrees that not all content is suitable for all audiences. The Australian Classification system plays an important role in ensuring that Australians can only access age-appropriate games and content."
State of Decay focuses on surviving in a zombie-infested world, and promises a dynamically generated experience that changes in real time.
The game has sold over 500,000 copies on Xbox Live Arcade since its release in North America two weeks ago, making it the fastest-selling original game on XBLA. A PC version is also in the works, but no additional details or release date have been revealed.