The 21-year-old is the first Japanese to test positive at a Winter Olympics and he was immediately thrown out of the Games on Monday.
The case will no doubt embarrass Japan, organizers of the Summer Games in 2020, and again forces the drug issue to the fore after Russia were formally banned for state-sponsored doping.
Saito returned positive tests for acetazolamide, an unauthorized diuretic which can be used to mask powerful performance-enhancing drugs.
"I want to fight to prove my innocence because I don't remember [taking the drug] and it's incomprehensible," Saito said in a statement.
The Court of Arbitration for Sport (CAS), which handles doping cases during the Games, said Saito had left the Olympic Village voluntarily and would be provisionally suspended from all competition pending a full investigation.
The head of the Japanese Olympic delegation in Pyeongchang, Yasuo Saito, said the skater was the first Japanese athlete to test positive for doping at a Winter Olympics. The athlete was "surprised and dismayed" by the outcome of the drugs test, he said.
Saito, a human biology student whose sister Hitomi is also competing in Pyeongchang, arrived at the village on February 4. He was awoken 2 am the following morning by doping testers who took two samples.
"Both samples tested positive," said the head of the delegation, who is also the vice president of the Japan Olympic Committee.
Short-track speed skater Saito was a member of Japan's 3,000 meter relay team that finished third at the 2013 and 2014 world junior championships.
He was penciled in as a substitute for the 5,000 meter on Tuesday and could have raced in other events in Pyeongchang.
Saito was summoned before a CAS tribunal on Monday following the positive tests for acetazolamide, a medication used to treat complaints ranging from epilepsy to heart failure.