The contest's sponsor, Club Libby Lu, withdrew the prize on Saturday and awarded it to another unnamed winner.
"With this decision, we hope to revive the intended spirit of the contest, which was designed to make a little girl's holidays extra special," Club Libby Lu chief executive Mary Drolet said in a statement Saturday.
Officials with the Chicago-based chain surprised the girl on Friday at a Club Libby Lu store in a suburban Dallas mall. Club Libby Lu sells clothes, accessories and games for young girls.
The girl won a makeover that included a blonde Hannah Montana wig, as well as the grand prize: airfare for four to Albany, N.Y., and four tickets to the sold-out Hannah Montana concert on Jan. 9.
The opening line in the essay was: "My daddy died this year in Iraq."
But the girl's mother, Priscilla Ceballos, admitted later Friday that the essay and the military information she provided about her daughter's father were untrue.
Ceballos had told Club Libby Lu officials that the girl's father died April 17 in a roadside bombing in Iraq, company spokeswoman Robyn Caulfield said.
She identified the soldier as Sgt. Jonathon Menjivar, but the Department of Defense has no record of anyone with that name dying in Iraq.
"We did the essay and that's what we did to win. We did whatever we could do to win," Ceballos said in an interview with Dallas TV station KDFW on Friday. "But when (Caulfield) asked me if this essay is true, I said, `No, this essay is not true."'