A damning report by the Equality and Human Rights Commission found the party was responsible for unlawful acts of harassment and discrimination.
Mr Corbyn rejected some of the report’s findings and claimed the issue had been “dramatically overstated for political reasons” by his critics.
His comments prompted Labour leader Sir Keir Starmer to take decisive action against his predecessor.
Sir Keir told reporters: “If – after all the pain, all the grief, and all the evidence in this report – there are still those who think there’s no problem with anti-Semitism in the Labour Party, that it’s all exaggerated, or a factional attack, then, frankly, you are part of the problem too.
“And you should be nowhere near the Labour Party either.”
Sir Keir said the findings of the EHRC investigation marked a “day of shame” for Labour and he was “truly sorry” for the pain caused.
Mr Corbyn denied he was “part of the problem” and told broadcasters he would not quit Labour: “Of course not. I am proud to be a member of the Labour Party, I joined the Labour Party when I was 16, I’ve fought racism all my life, and I’ll fight racism for the rest of my life.”
He said he would “strongly contest” the decision to suspend him, which he described as a “political intervention”.
A Labour Party spokesman 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 EHRC investigation found evidence of “political interference” by then leader Mr Corbyn’s office in the complaints process.
EHRC interim chairwoman Caroline Waters said there had been “inexcusable” failures which “appeared to be a result of a lack of willingness to tackle anti-Semitism rather than an inability to do so”.
The watchdog identified three breaches of the Equality Act relating to political interference in complaints, failure to provide adequate training to those handling anti-Semitism cases, and harassment.
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. The notice is legally enforceable by the courts if not fulfilled.
The EHRC found 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 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.
Labour has committed to proper training, with the EHRC recommending it should be mandatory and fully implemented within six months.
The watchdog highlighted the actions of former London mayor Ken Livingstone and Pam Bromley, who was a councillor in Rossendale, Lancashire, during the anti-Semitism row.
The EHRC said Labour was responsible for their anti-Semitic conduct, resulting in a finding of unlawful harassment, because they were acting as agents of the party.
But the report said this was only the tip of the iceberg and a further 18 “borderline” cases were found, involving councillors, local election candidates and constituency party office holders where there was not enough evidence to conclude Labour was legally responsible for their conduct.
Recommendations made by the watchdog include commissioning an independent process to handle anti-Semitism complaints and acknowledging the effect political interference has had and implementing clear rules to stop it happening again.
The EHRC’s lead investigator Alasdair Henderson told a press conference that blame could not be placed on one person alone and the problem went beyond Mr Corbyn, but added that “as leader of the party, and with evidence of political interference from within his office, he does have a responsibility ultimately for those failings”.
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.”
Chief Rabbi Ephraim Mirvis said the report was a “historic nadir for the Labour Party”.
Board of Deputies of British Jews president Marie van der Zyl welcomed Mr Corbyn’s suspension, saying: “Having presided over the descent of a proudly anti-racist party into a party that broke equalities law in its treatment of Jews, his shameless comments today showed that he remains part of the problem and is an obstruction to the resolution of the issue.”