Father Maciel founded the order in 1941
Pope Benedict XVI is to appoint an envoy to overhaul a conservative Roman Catholic order whose Mexican founder abused young children over many years.
Marcial Maciel's actions were "immoral" and the Legionaries of Christ order had to be "purified", the Vatican said.
Maciel, who died in 2008, fathered a daughter with a mistress as well as sexually abusing many boys and young men over a period of 30 years.
He had enjoyed the support of the previous pope, John Paul II.
In 2006, Father Maciel was banned from exercising his ministry in public and told to retire to a life of prayer and penitence.
The priest - who founded the conservative order in 1941 - had always denied any wrongdoing. He died in January 2008 at the age of 87.
The Vatican statement came after the Pope met five bishops who investigated the order.
It said Fr Maciel had led a double life "devoid of scruples and authentic religious sentiment".
The Pope has been accused of being part of a culture of secrecy
"By pushing away and casting doubt upon all those who questioned his behaviour, and the false belief that he wasn't doing harm to the good of the Legion, he created around him a defence mechanism that made him unassailable for a long period, making it difficult to know his true life," the Vatican statement said.
The Catholic Church has been hit by a wave of allegations that Church authorities in Europe and North and South America failed to deal properly with priests accused of paedophilia, sometimes just moving them to new parishes where more children were put at risk.
The Pope himself has been accused of being part of a culture of secrecy, and of not taking strong enough steps against paedophiles when he had that responsibility as a cardinal in Rome.
However, his supporters say he has been the most pro-active pope yet in confronting abuse.