The boxy brown suitcase-shaped pavilion, covered with the brand's signature stencilling, was erected 10 days ago just outside GUM, a 19th century upmarket department store.
It lies across the square from the Kremlin, and many tourists and Russians complained it was blocking views of most landmark sites.
The once omnipotent Communist Party was outraged by its proximity to Lenin's tomb, and preservationists stressed that Red Square is a Unesco World Heritage Site.
On Wednesday, following several days of furious media commentary, the GUM store said it had asked Louis Vuitton to take down the pavilion.
It was never entirely clear who had granted permission as the square is under official jurisdiction of the Kremlin.
But a Kremlin source told Russian news agencies that the structure was "not agreed with the presidential administration".
The giant pavilion was erected last week
The Kremlin's Office of Presidential Affairs, which oversees Red Square, also said it had nothing to do with the trunk.
Spokesman Viktor Khrekov said: "The GUM (store) dealt with the permission issues. We had nothing to do with it."
GUM said on its website: "Considering the view of some of the public, and the fact that the pavilion's size has surpassed the agreed parameters, we told Louis Vuitton about the need to immediately dismantle the pavilion."
Red Square, the formal street address of both Lenin's Mausoleum and St Basil's Cathedral, is by far the most heavily policed spot in Russia.
The two-storey trunk, measuring 30ft-high by 100ft-long, had been bathed in the same dramatic lighting at night as the nearby cathedral.
It was designed to house an exhibit about travellers who had used the brand's luggage in the past.
After its planned opening on December 2, the exhibit's proceeds were to go to the Naked Hearts children's foundation of Russian supermodel Natalia Vodianova, who invited everyone to attend the "unique event" in a promotional video.
Some have viewed the trunk as a symbol of modern Russia where corruption has made anything possible - even putting up giant luxury advertisements on the symbolic square without asking Muscovites - and nobody would be held responsible.
But a Louis Vuitton spokesman in Paris said "we haven't received any official orders to take down" the trunk.
Late on Wednesday workers were putting up posters on the fence around the trunk, warning people about the beginning of dismantling works.
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