  We present Monte Carlo simulations for a classical antiferromagnetic
Heisenberg model with both nearest ($J_1$) and next-nearest ($J_2$) exchange
couplings on the square lattice in the presence of non-magnetic impurities. We
show that the order-by-disorder entropy selection, associated with the
Ising-like phase transition that appears for $J_2/J_1>1/2$ in the pure spin
model, is quenched at low temperature due to the presence of non-magnetic
impurities. Evidences that a new competing order is stabilized around the
impurities, and in turn induces a re-entrance phase transition are reported.
Implications for local magnetic measurement of the parent compound of iron
pnictides are briefly discussed.
