Mr Livingstone said he was expressing his honestly-held view
The Adjudication Panel for England ruled Ken Livingstone had brought his office into disrepute when he acted in an "unnecessarily insensitive" manner.
The ban is due to begin on 1 March and the mayor's deputy Nicky Gavron will stand in for Mr Livingstone.
The mayor said: "This decision strikes at the heart of democracy."
He added: "Elected politicians should only be able to be removed by the voters or for breaking the law.
The case tribunal is concerned that the mayor does seem to have failed... to have appreciated that his conduct was unacceptable
David Laverick
Panel chairman
Adjudication panel explained Profile: Ken Livingstone
"Three members of a body that no one has ever elected should not be allowed to overturn the votes of millions of Londoners."
Mr Livingstone, whose annual salary is £133,997, said he would announce what action he would be taking next week.
The hearing followed a complaint from the Jewish Board of Deputies, which had not called for the mayor to be suspended over the comment he made to the Evening Standard's Oliver Finegold outside a public-funded party.
The chairman of the panel, David Laverick, said it had decided on a ban because Mr Livingstone had failed to realise the seriousness of his outburst.
He said: "The case tribunal accepts that this is not a situation when it would be appropriate to disqualify the mayor.
The Mayor and the Journalist Ken Livingstone was recorded asking reporter Oliver Finegold if he is a "German war criminal". Mr Finegold replies: "No, I'm Jewish, I wasn't a German war criminal. I'm quite offended by that." The mayor then says: "Ah right, well you might be, but actually you are just like a concentration camp guard, you are just doing it because you are paid to, aren't you?"
The original row
Mr Laverick went on to say that the complaint should never have reached the board but did so because of Mr Livingstone's failure to apologise.
In a statement, the Board of Deputies of British Jews said it regretted the guilty result, but said Mr Livingstone had been "the architect of his own misfortune" by failing to recognise the upset caused.
It added it had never sought anything more than an apology and an acknowledgement that his words were inappropriate for the "elected representative of Londoners of all faiths and beliefs".
'Outrageous ruling'
But Deputy Mayor Nicky Gavron said the incident had been "blown out of all proportion" and described the decision as absurd.
Association of London Government chairman Sir Robin Wales added the "outrageous ruling" would stall the mayor in his work to increase police numbers and prepare the city for the 2012 Olympics.
Sir Iqbal Sacranie, secretary general of the Muslim Council of Britain, said: "This decision constitutes a clear over-reaction and an affront to our democratic traditions."
Mr Livingstone has said he was expressing his honestly-held political view of Associated Newspapers, but he had not meant to offend the Jewish community.
HAVE YOUR SAY I'm certainly no fan of Ken Livingstone but this is a stupid waste of time and money
Tio Terry, Epsom
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The Evening Standard's editor Veronica Wadley said that Mr Finegold had behaved impeccably when he was insulted and accused Mr Livingstone of being stubborn.
The London Jewish Forum welcomed the ruling, with chairman Adrian Cohen calling for the mayor to create a strategy to ensure London's Jews would be treated with respect.
Conservative London Assembly Member Brian Coleman said Mr Livingstone had let Londoners down. All three called for the mayor to apologise.
Baroness Hamwee, Liberal Democrat chair of the assembly, said she was "quite taken aback" by the length of the suspension.
If an appeal fails, Mr Livingstone will be responsible for paying his own legal costs, estimated at £80,000.
The Adjudication Panel for England has ruled that London Mayor Ken Livingstone should be suspended from office for one month over an insult given to an ''Evening Standard'' reporter in which he likened the reporter to a concentration camp guard after being hassled by the reporter outside his home.

The suspension of an elected representative by an unelected panel over an issue in which a law was not broken is unprecedented. The Mayor's deputy, Nicky Gavron, has condemned the decision, as has the chairman of the Association of London Government Robin Wales.

Ken Livingstone will announce next week what his action will be. He may appeal to the High Court.