The West Bradford MP was stripped of the parliamentary whip and barred from party activity pending an investigation of her behaviour – which David Cameron branded racist.
Opposition leader Jeremy Corbyn had initially delivered only a reprimand, arguing that while the comments – made before Mr Shah was an MP – were “offensive and unacceptable”, Ms Shah did not hold discriminatory views.
But under pressure from senior Labour figures to take disciplinary action amid mounting concern about anti-Semitism within the ranks – and with the Prime Minister joining calls for her suspension – it was announced Ms Shah had been excluded.
“Jeremy Corbyn and Naz Shah have mutually agreed that she is administratively suspended from the Labour Party by the general secretary,” a party spokesman said.
“Pending investigation, she is unable to take part in any party activity and the whip is removed.”
The leadership was also forced to deny editing an article written by Ms Shah for Jewish News – one of a string of apologies issued by the MP – to remove direct references to anti-Semitism and wider issues in the party.
BuzzFeed news said it had seen an original version drawn up by the MP’s office which included an admission that she had “helped promote anti-Semitic tropes”, which did not appear in the version on the publication’s website.
A spokesman for Mr Corbyn said: “We have never seen those words. The article was the work of Naz Shah.”
The party said the article was “not seen, written, edited or approved by Labour HQ”.
Ms Shah, who quit her role as a Parliamentary assistant to shadow chancellor John McDonnell yesterday, told MPs she deeply regretted the hurt caused by the posts and wanted to work with Jewish groups to bolster understanding.
In a 2014 Facebook post, she shared a graphic of Israel’s outline superimposed on to a map of the US under the headline “Solution for Israel-Palestine Conflict – Relocate Israel into United States”, with the comment: “Problem solved”.
The Guido Fawkes website – which published the post – also pointed to another made before Ms Shah was an MP, which used the hashtag #Israel Apartheid and said: “Never forget that everything Hitler did in Germany was legal”.