A statement from Labour said Mr Corbyn had been suspended "pending investigation" after his comments on the report and subsequent failure to retract them.
Sir Keir Starmer had been under pressure to act following the report from the Equality and Human Rights Commission (EHRC), which said the Labour Party was responsible for unlawful acts of harassment and discrimination during Mr Corbyn's time as leader.
The watchdog also said it found evidence of "political interference" by his office in the complaints process, and pointed to "inexcusable" failures which "appeared to be a result of a lack of willingness to tackle anti-Semitism rather than an inability to do so".
Mr Corbyn said he did not accept all the EHRC's findings and insisted he had improved the process for handling anti-Semitism complaints.
He also claimed the scale of the problem had been "dramatically overstated for political reasons by our opponents inside and outside the party, as well as by much of the media".
A spokesman for the Labour Party said: "In light of his comments made today and his failure to retract them subsequently, the Labour Party has suspended Jeremy Corbyn pending investigation.
"He has also had the whip removed from the Parliamentary Labour Party."
The decision has been welcomed by Wolverhampton South East MP Pat McFadden, who said it was "shameful that a party founded on a belief in equality should have become a home for anti-Semitism in the past few years".
The Shadow City Minister added: "The statement released by Jeremy Corbyn in the face of the damning findings of the EHRC report showed no understanding of the depth of the problem or his responsibility for presiding over it.
"Given the seriousness of the report’s findings and his response to them today, the party has done the right thing in suspending him.
"We are under new leadership now and engaged in a much needed process of change. What happened over the past five years in the Labour Party must never be allowed to happen again."
Former Dudley North MP Lord Austin was among those to call for Mr Corbyn to resign, while Tory Chairman Amanda Milling, the MP for Cannock Chase, had urged Sir Keir to expel him.
The Campaign Against Antisemitism, which referred Labour to the EHRC, had this morning submitted a complaint to Labour demanding action against Mr Corbyn.
In its report, the EHRC said Labour was responsible for three breaches of the Equality Act (2010) relating to: political interference in complaints, failure to provide adequate training to those handling anti-Semitism cases and harassment.
Interim chairwoman Caroline Waters, said: "The Labour Party made a commitment to zero tolerance for anti-Semitism.
"Our investigation has highlighted multiple areas where its approach and leadership to tackling anti-Semitism was insufficient.
"This is inexcusable and appeared to be a result of a lack of willingness to tackle anti-Semitism rather than an inability to do so."
The party has been served with an unlawful act notice and has been given until December 10 to draft an action plan to implement the report's recommendations, which is legally enforceable by the courts if not fulfilled.
The EHRC found evidence of political interference in the complaints process, with 23 instances of inappropriate involvement by the Leader of the Opposition's Office (LOTO) and others in the 70 files the watchdog looked at.
They included LOTO staff influencing decisions, including on suspensions or whether to investigate claims.
The EHRC found the situation to be indirectly discriminatory and unlawful as it put the person making the complaint at a disadvantage.
The watchdog found that the lack of training for people handling anti-Semitism complaints indirectly discriminated against Jewish members until August 2020, by which time Sir Keir Starmer was leader of the party.
The Jewish Labour Movement said blame for the "sordid, disgraceful chapter" in the party's history "lies firmly with those who held positions of leadership".
The Campaign Against Antisemitism's Gideon Falter said: "Jeremy Corbyn and those around him who took part in or enabled the gaslighting, harassment and victimisation of Britain's Jewish minority are shamed for all time.
"Those who defended and stood by them are shown to have made possible the closest flirtation that mainstream British politics has had with anti-Semitism in modern history."
A joint statement from the Board of Deputies of British Jews, the Jewish Leadership Council and the Community Security Trust said: "This report is a damning verdict on what Labour did to Jews under Jeremy Corbyn and his allies.
"It proves why British Jews were so distressed and it disgraces those who attacked us for speaking out against anti-Jewish racism."