The Board of Control for Cricket in India (BCCI) said in a statement that Dalmiya, 65, would not take part in its activities until a probe into his alleged financial deals was completed.
"BCCI president Sharad Pawar wrote to Dalmiya informing him that he was being suspended from participating in the affairs of the board until adjudication of the charges," BCCI treasurer N. Srinivasan said.
Srinivasan said Dalmiya had been accused of mishandling funds of around 890,000 dollars relating to the 1996 World Cup, which India hosted jointly with Pakistan and Sri Lanka.
Dalmiya, who was organising secretary of that event, later served as the president of the International Cricket Council (ICC) for three years from 1997 to 2000.
Since 1983, he had been the most powerful figure in the BCCI until his faction was thrown out by Pawar, a political heavyweight and federal agriculture minister, in a bitter election in November.
The new BCCI regime filed a police complaint against Dalmiya last month over the alleged financial bungling. The matter is being investigated by Mumbai police.
Dalmiya, who has denied the allegations, declined to comment on his suspension.
But the Cricket Association of Bengal (CAB), Dalmiya's home body of which he is president, said it was seeking legal opinion on the suspension.
"The BCCI acted in undue haste and announced the suspension of Dalmiya even before going into the merit of the case," the CAB said in a statement from Kolkata.
"We are seeking legal opinion in the matter and would meet soon to discuss the future course of action".
Dalmiya is a known master of real politics whose financial wizardry was largely credited with turning the gentlemen's game into a lucrative global sport.
He was credited with bringing the World Cup to the Indian sub-continent which has held the event twice in 1987 and 1996.
Dalmiya's defeat to Pawar in November was the first time he had lost a BCCI election since he first became treasurer in 1983.
Two former BCCI chiefs, Inderjit Bindra and Raj Singh Dungapur, broke away from the Dalmiya faction a few years ago and threw their weight behind Pawar.
When Dalmiya ruled, the BCCI had assets worth around 250 million dollars and its last annual report gave its gross earnings for the year 2004-05 as 46 million dollars.
The new regime has announced sponsorship and media rights deals around the Indian team worth a billion dollars.