The Indian cricket board, the BCCI, began a crucial meeting on Monday without Mr Modi, with discussion of action against him high on the agenda.
Mr Modi, who is being investigated by tax officials, denies all allegations of wrongdoing.
Some of the world's top cricketers play for the lucrative IPL.
BCCI president Shashank Manohar waited until the end of the IPL final on Sunday to announce Mr Modi's suspension.
"The alleged acts of individual misdemeanours of Mr Lalit K Modi... have brought a bad name to the administration of cricket and the game itself," he said in a statement.
Mr Modi was suspended from "participating in the affairs of the board, the IPL, the working committee and any other committee of the Board of Control for Cricket in India".
He was given 15 days to demonstrate why disciplinary action should not be taken against him.
Mr Modi was originally scheduled to attend Monday's meeting but refused to do so. On Sunday he changed course and said he would attend but the charges against him would have to be made in writing, prompting the suspension.
The BBC's Soutik Biswas in Delhi has described it as the worst crisis in Indian cricket since a match-fixing scandal involving senior national players in 2000.
Modi defiant
In Sunday's final in Mumbai, Chennai Super Kings beat the Mumbai Indians by 22 runs but correspondents say events on the field in Mumbai were overshadowed by the continuing allegations of corruption and money-laundering.
When he heard of the suspension, Mr Modi reacted defiantly.
"Good for them," he told Indian TV channel NDTV. "Are they so scared of me attending? Are they so scared of the truth?
"I will not be able to attend the meeting, but I will wait for my turn," he said.
Earlier, in an address to the crowd after the IPL final, he insisted the league was "clean and transparent".
"There have been some off-field unpleasant dramas based on the unknown, half-truths and motivated leaks from all sorts of sources," he said.
"I reassure you that if there has been any flouting of the rules and regulations or if there have been any irregularities, I shall take full responsibility."
The crisis erupted after Mr Modi revealed on his Twitter account that a female friend of Shashi Tharoor, a junior government minister, had invested in a consortium awarded a new IPL franchise in Kochi.
That revelation caused a storm which sparked Mr Tharoor's resignation and also led to government investigations into the teams, sponsors, broadcasters and event managers associated with the IPL.
The IPL has become a multi-billion dollar industry, which attracts some of India's wealthiest businessmen and women.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/1/hi/world/south_asia/8643302.stm
