You are correct that in 1950, Jordan formally annexed the West Bank, and gave automatic citizenship to its inhabitants. Jordan allowed Palestinians in the West Bank to claim citizenship from 1949, but the automatic citizenship being granted was new.

This citizenship arrangement resulted from the annexation. Jordan hoped to assimilate Palestinians, and give them Jordanian national identities, from education on through. Even so, Jordan's commitment to this goal would often waver and change, and was not very effective. Eventually, after Israel had controlled the West Bank for over 15 years, and given the advances of the Palestinian national movement, Jordan seemingly gave up on an annexation that was never recognized by the international community to begin with. So while Jordan gave Palestinians citizenship initially, they decided that they would give them differing citizenships and different opportunities. In 1983, Jordan began to issue green cards and yellow cards to different types of residents in Jordan. Those who resided permanently in Jordan before June 1, 1983, and who had family reunification cards, were given yellow cards, denoting full citizenship and residency. Those who left after, or who did not reside in Jordan up to that point, were given green cards, which did not really denote citizenship, and could only visit Jordan for up to a month at a time. As you can imagine, this means that people who may have had Jordanian citizenship up to that point, granted such because of their ancestry or having lived in the West Bank as controlled by Jordan through 1967, did lose effective citizenship quite quickly. Following the Jordanian abdication of their claims to the West Bank in 1988, it became clearer than ever that Jordan was not planning on giving citizenship in full to West Bank residents any longer, because they viewed it as a demographic threat and a move that was diplomatically and effectively useless for them (Palestinians and other Arab states claimed it harmed Palestinian unity, as well).

So the withdrawal realistically came before the forfeiting of the claim formally, but it was a precursor.