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The pan-African body warned of new actions if power was not transferred to a civilian authority – a key demand of pro-democracy protesters.
According to opposition activists, a paramilitary group killed 108 people this week, but the authorities estimate the figure at 46.
Residents said pro-government militias were spread throughout the capital, Khartoum.
The violence escalated on Monday when security forces stormed a weeklong siege outside the army headquarters in the capital. This is the deadliest incident since former President Omar al-Bashir, who was ousted by the army in April after months of peaceful protests.
Talks between opposition activists and the interim ruling military council have since halted. On Thursday, the UK Foreign Office convened the ambbadador of Sudan to voice his concerns about the changing situation.
What did the African Union say?
"The Peace and Security Council of the AU immediately suspended the participation of the Republic of Sudan in all its activities until the establishment of a civilian-led transitional authority. , the only solution to allow Sudan to get out of the current crisis, "the AU tweeted on Thursday.
The decision was unanimously taken by the members at an emergency meeting of the AU in Addis Ababa, which lasted more than five hours.
The chairman of the African Union Commission, Moussa Faki Mahamat, on Monday called for an "immediate and transparent" investigation into the killings.
Ethiopian Prime Minister Abiy Ahmed was traveling to Khartoum on Friday to mediate between the two sides, the Reuters news agency reported, citing diplomatic sources.
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