Jeremy Corbyn has been suspended from Labour just six months after stepping down as leader, threatening to ignite internal civil war.
A party spokesman said it was because of his reaction to a bombshell report into how complaints of antisemitism were handled.
Some MPs have welcomed the move as necessary, saying it shows Labour has changed and will take swift action against racism.
But it has also sparked a rupture, with those who remain loyal to Mr Corbyn vowing to challenge the decision and warning a divided party will lose the next election.
Mr Corbyn now faces an investigation, but has refused to retract the comments that sparked such furore among senior party figures.
The row erupted when Mr Corbyn gave his reaction to a damning report from the Equalities and Human Rights Commission, which has been running for over a year.
The watchdog found Labour had broken the law with its handling of antisemitism complaints during the period when Mr Corbyn was in charge.
It said there were "serious failings" by the party leadership, found evidence of political interference by Mr Corbyn's office into complaints, and judged the party responsible for "unlawful acts of harassment and discrimination".
Mr Corbyn reacted by saying he tried to make the process for investigating and acting on complaints quicker, but admitted: "I regret that it took longer to deliver that change than it should."
He also added that "the scale of the problem was also dramatically overstated for political reasons".
And then doubling down on his own innocence, Mr Corbyn told Sky News in an interview: "I'm not part of the problem."
Following the statement, a Labour spokesman said he was being suspended and having the whip withdrawn - meaning he will not represent the party in parliament - "in light of his comments made today and his failure to retract them subsequently".
A surprised Mr Corbyn is said to have been told about the news by a TV crew and exclaimed: "What?"
He then released another statement, vowing to "strongly contest the political intervention to suspend me".
"I've made absolutely clear those who deny there has been an antisemitism problem in the Labour Party are wrong," the Islington North MP added.
Leader Sir Keir Starmer said the direction to suspend Mr Corbyn was not given by him but taken by the party.
But he added it was "appropriate action" that "I fully support" and added: "I made it very clear... the Labour Party will not tolerate antisemitism or the denial of antisemitism."
Mr Corbyn's old shadow cabinet and union allies sprang to his defence, with former shadow chancellor John McDonnell urging party members to "stay calm" and "all call upon the leadership to lift this suspension".
Diane Abbott, who was shadow home secretary until the spring, also tweeted: "I oppose the decision to suspend Jeremy Corbyn from the Labour Party and will work for his reinstatement."
And Len McCluskey, the head of the Unite union, called it "an act of grave injustice which, if not reversed, will create chaos within the party and in doing so compromise Labour's chances of a general election victory", warning: "A split party will be doomed to defeat."
But other Labour figures welcomed the decision, with shadow foreign secretary Lisa Nandy saying it was "the right thing to do".
Labour MP Harriet Harman, chair of the human rights committee, tweeted: "This is the right thing to do."
And another backbencher, Margaret Hodge, said: "Labour is finally saying enough is enough, antisemitism can never be tolerated in our party. Now we can finally move on."
The Conservatives claim Sir Keir has more to answer for, with chair Amanda Milling saying he "loyally served in Corbyn's shadow cabinet as antisemitism ripped through the Labour Party".