The North Antrim MP will also be excluded from the House of Commons for 30 sitting days from 4th September following a major breach of parliamentary rules.
Electoral authorities in Northern Ireland are to begin drawing up measures which could see him face a by-election if enough constituents demand it.
He has vowed to fight for his seat if he faces the electorate over his failure to declare two luxury family holidays paid for by the Sri Lankan government.
In March 2014, the senior Democratic Unionist lobbied against a proposed United Nations resolution to investigate alleged human rights abuses during a civil war on the Indian Ocean island without citing his financial benefits.
If 10% of his constituents sign a petition, an election will be called.
Sir Kevin Barron MP, chairman of the Commons Committee on Standards, said: "We concluded that Mr Paisley had committed serious misconduct and that his actions were of a nature to bring the House of Commons into disrepute, which is a further breach of the code of conduct.
"Because we regard this as an especially serious case, we have recommended that Mr Paisley be suspended from the service of the House for a period of 30 sitting days, starting on the fourth of September."
A DUP statement said it took the matter very seriously.
"The party officers have decided to suspend Mr Ian Paisley MP from membership of the party pending further investigation into his conduct."
Sinn Fein deputy leader Michelle O'Neill said Mr Paisley's colleagues in Westminster have overwhelmingly voted to impose the most serious sanction handed to any MP since 1949.
"When you consider some of the sleaze, corruption and criminal scandals that have engulfed the British Parliament during that time, that is quite extraordinary."
Patrick Corrigan, head of Amnesty International in Northern Ireland, said the victims were those killed in Sri Lanka.
"Mr Paisley saw fit to lobby the Prime Minister against a UN investigation into gross human rights violations, including the mass killing of civilians at the end of the Sri Lankan war, for which no adequate investigation has ever been carried out."
Mr Paisley told his local paper, the Ballymena Guardian, he deeply regretted his actions.
He said: "There are also some who would have me booted out of Parliament and a by-election called to fill that vacancy.
"They are opportunists, some with questionable motives, and I can tell them that I have no intention of going quietly into the night.
"If a petition leads to a by-election, make no mistake about it, I will seek re-election as I have never run away from an election in my life and don't intend to do so now."
He is one of 10 pro-Brexit Democratic Unionists helping to prop up Theresa May's minority Government.
Mr Paisley has denied having any ulterior motive for the "genuine mistake" in 2013, adding that he accepted his "total failure" and offered an unreserved apology to the House of Commons.
The Commons Standards Committee report said the cost of the hospitality may have been "significantly more" than Mr Paisley's £50,000 estimate, with the holidays including business-class air travel, accommodation at first-class hotels and more for him and his wider family.
The trips included meeting Sri Lankan government figures.
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