"His treatment of the journalist was unnecessarily insensitive and offensive," said David Laverick, chairman of the Adjudication Panel for England, the disciplinary panel which ruled on the case.
The suspension is effective March 1. Livingstone has the right to appeal the ruling.
"This decision strikes at the heart of democracy," the mayor said. "Elected politicians should only be able to be removed by the voters or for breaking the law."
Since Livingstone lost the case, he must pay his own costs, estimated at more than $175,000. The panel made no recommendation whether his salary should be suspended.
Laverick said the panel was concerned that Livingstone refused to apologize.
"The mayor does seem to have failed, from the outset of this case, to have appreciated that his conduct was unacceptable, was a breach of the code (the Greater London Authority code of conduct) and did damage to the reputation of his office," Laverick said.
"His representative is quite right in saying, as he did on Feb. 23, that matters should not have got as far as this but it is the mayor who must take responsibility for this."
Livingstone did not attend Friday's session to hear the ruling.
The mayor had told the panel that he had not meant to offend the Jewish community when he asked Evening Standard reporter Oliver Finegold whether he had been a "German war criminal."
Finegold, who had approached the mayor for comment after a reception for the gay and lesbian community in February, replied that he was Jewish.
Livingstone told the reporter he was "just like a concentration camp guard. You're just doing it because you're paid to, aren't you?" He referred to Finegold's employer as "a load of scumbags and reactionary bigots."
That was a reference to Associated Newspapers, publishers of the Evening Standard, the Daily Mail and the Mail on Sunday.
"The whole point being made was a dislike for Associated Newspapers and their history of supporting policies, which are inconsistent with the policies of the mayor," the mayor's lawyer, Tony Child, argued earlier this week.
"There's a right to be offensive and to express in hyperbolic terms opposition to Associated Newspapers and their policies," Child added.
Livingstone has also pointed to the pro-Nazi line taken by the Mail papers in the 1930s. Despite his loathing for the publisher, however, Livingstone once was employed as a restaurant critic for the Evening Standard.
"This paper has not always seen eye to eye with Mr. Livingstone but we have applauded his work in helping to unite London after 7/7," said Evening Standard editor Veronica Wadley, referring to the July 7 terrorist bombings.
"We believe, though, that it is only right that the adjudication panel has now decided that Mr. Livingstone acted in a manner that was ill-fitting for the mayor."
"It should never have reached this point when a simple apology could have avoided all the pain caused to so many Jewish Londoners who have been affected by the Holocaust," said Adrian Cohen, chairman of the London Jewish Forum.
A stubborn streak and a knack for provocation had served Livingstone well in his political career and he is known as "Red Ken" because of his left-wing policies.