The 33-year-old was detained by Guangzhou Police and the club confirmed he had been released, with Guangzhou Evergrande policy stating that any player who breaks the law will be released.
"The player Yu Hanchao severely violated the disciplinary provisions of the club, and therefore was dismissed," a club statement read.
Yu will be facing 15 days in custody, a fine of 5000 Chinese Yuan (£562/$709) and a 12-point penalty on his driver's license.
Guangzhou Evergrande midfielder Yu Hanchao, also a national team player, was sacked by the Chinese Super League champion after he was caught fabricating his own car plate. He will also face a 15-day detention and a fine of 5,000 yuan (US$708.73). pic.twitter.com/a6HXlVBNkF— SHINE (@shanghaidaily) April 14, 2020
Video footage shows Yu trying to change an E to an F on his number plate, possibly to avoid local traffic restrictions.
According to Guangzhou city policy, non-local vehicles are only permitted to drive for four days in a row, with drivers then required to not use their vehicle for the following four days. Yu's vehicle is registered in his hometown of Liaoning, which is over 2,700 kilometers from Guangzhou.
Yu had been with Guangzhou Evergrande for several seasons, with the winger joining the club from Dalian Arbin in 2014. On the international level Yu has amassed 59 caps with the Chinese national team, having made his debut in 2009.
Yu helped his team become the most successful outfit in China in recent seasons, with Guangzhou Evergrande having won the Chinese Super League in every season but one between 2011 and 2019.
The club have also won the AFC Champions League on two occasions, in 2013 and 2015.
Currently, the Chinese Super League is on hiatus due to the coronavirus crisis that originated in China.
The CSL was among the first leagues to suspend play when it postponed the beginning of the 2020 season indefinitely in early February.
There had been hope the league was nearing a return as Covid-19 cases diminish in China, but a positive test of an unnamed player at second-division side Meizhou Hakka last month has put the league's return on hold again.
One of the CSL's most notable players, former Manchester United star Marouane Fellaini, recently left the hospital after recovering from a battle with Covid-19.