An inspection of Owen Mor on the Culmore Road highlighted issues in May.
The home was closed but later opened to patients despite inspectors’ concerns, the Regulation and Quality Improvement Authority (RQIA) said.
The Western Trust said it informed the RQIA of the home’s phased reopening.
The regulator has now formally stopped new patient admissions.
It is the first time the regulator has issued such a notice to a nursing home in the North of Ireland.
In May, inspectors mentioned concerns about staff knowledge, including nurses not following policies and procedures, as well as inadequate records about areas of patient safety such as falls, feeding and nutrition.
The 81-place facility is for people with learning difficulties, mental health issues and dementia.
RQIA chief executive Olive MacLeod said inspectors did not find the improvement that was expected, specifically at one unit during follow up inspections last week.
She said new residents had been admitted to the home despite May’s inspection recommendations.
“Normally, when we put a failure to comply notice on a home, the trust would close it to admissions to allow that home to settle, stabilise and address the problems we have identified,” she told BBC Radio Foyle
“I think that happened for a period but more patients were readmitted to this home.“I believe the trust possibly saw the improvements, but we hadn’t tested those improvements, and we are back to where we find ourselves today.
“We have formally closed them to admissions.”
She said she would have preferred if the trust had not admitted new patients to allow for further inspection.
“It is a fairly big home and it needed a fair bit of support to get it back on track,” she said.
The Western Trust said it gave approval to the management of Owen Mor to reopen to admissions in a phased manner in mid July, and notified the RQIA that it was doing so.
“For the Trust, this was an important test of their ability to demonstrate they were able to ensure and then sustain the required improvements throughout the home in advance of the anticipated re-inspection in August,” a Trust spokeswoman said.
She said no residents “have been placed at increased risk as a result of this decision”.
Last week’s inspections found there were still concerns around medication management, but did not find patients to be at risk.
On Monday, the home’s owners said they were working with an independent consultant to put in place a plan to address concerns.
Speaking on behalf of the owners, Dr Brendan McDonald said they would be seeking the agreement of regulators and the support of the Western Trust for new arrangements.
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