Secretary General Kamalesh Sharma cited Fiji's lack of progress towards democracy as the reason behind the suspension
The Commonwealth has fully suspended Fiji after it refused to bow to demands to call elections by next year.
Secretary General Kamalesh Sharma cited the Pacific island country's lack of progress towards democracy.
Mr Sharma said he was taking the step - only the second full suspension in the organisation's history - "in sorrow".
Commodore Frank Bainimarama seized power in Fiji in a 2006 coup and has said elections can only be reinstated in 2014, as part of his "roadmap".
He says he needs time to institute reforms that will end the ethnic-based voting system tipped in favour of ethnic Fijians.
But his critics charge that under his rule, Fiji has suspended the constitution, detained opponents and suppressed freedom of speech.
In a statement, the Commonwealth said it had demanded that Fiji commit, by 1 September, to rejoining negotiations with the opposition and to holding credible elections by October 2010.
Bridget Kendall, BBC News diplomatic correspondent
This is not the first time Fiji has been in trouble with the Commonwealth. It has twice faced the lesser sanction of being suspended from its meetings - after earlier uprisings in Fiji that also led to the suspension of democracy.
But this sanction goes a step further. In practical terms it means Fiji cannot attend any Commonwealth meetings, including taking part in the Commonwealth Games in 2010, or participate in training schemes and other technical aid.
A spokesman admitted that the Commonwealth was not a large donor to Fiji and the sanction is largely symbolic, and the Commonwealth was still prepared to remain engaged in any talks that might lead to a return to democracy.
Mr Sharma said that although Cmdr Bainimarama had reaffirmed "his commitment to the principles of the Commonwealth", he had not met the terms of the 1 September deadline.
He said Fiji's suspension was therefore "a step the Commonwealth is now obliged to take, and one that it takes in sorrow".
Cmdr Bainimarama repeated his opposition to the 2010 election timetable when he spoke to commercial radio earlier on Tuesday, reported AFP news agency.
"The Fiji government believes the roadmap is the only path to ensuring sustainable and true democracy, which includes... to have elections in 2014," he said.
"We will remain with that."
Fiji has already been banned from Commonwealth ministerial meetings. With its full suspension, all Commonwealth aid will be cut off and Fiji will not be allowed to participate in the 2010 Commonwealth Games.
FIJI'S COMMONWEALTH HISTORY
1987 - Fiji endures two military coups, declares a republic; the Commonwealth expels Fiji
1997 - Fiji readmitted to the Commonwealth after it introduces a non-discriminatory constitution
May 2000- Parliament stormed, PM Mahendra Chaudhry and cabinet taken hostage. Businessman George Speight proclaims himself acting PM
However, not all Commonwealth contact with Fiji will cease. Its special representative to the country, Sir Paul Reeves, is set to visit Fiji from 9-11 September - a fact welcomed by Mr Sharma in his statement.
Fiji has already been suspended from the regional Pacific Islands Forum, and some European Union aid to the country has been put on hold.
Fiji has had a chequered relationship with the Commonwealth. It was expelled in 1987 after two military coups, but was readmitted 10 years later when democracy was restored. It was also suspended in 2000 for 18 months.
The only other country to be fully suspended in the Commonwealth's history is Nigeria, during the rule of Gen Sani Abacha in 1995.
Nigeria returned to the Commonwealth after democratic rule was restored.
Pakistan was twice suspended from council meetings, and Zimbabwe was on course to be suspended when President Robert Mugabe pre-empted the move by walking out himself.
The Commonwealth is a grouping of 53 former British colonies, dependencies and other territories.
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