Jonathan Ross was tonight suspended from all broadcasting for 12 weeks, the BBC said.
BBC director general Mark Thompson said Ross's contribution to Brand's show "was utterly unacceptable and cannot be allowed to go uncensured or without sanction''.
Mr Thompson also announced Ross, said to earn £6m (€7.6m) a year, would not be paid for the period of his three-month suspension.
The BBC said he would “be suspended from all broadcasting for the BBC for a 12-week period, ending in mid-January 2009.
“He will not be paid by the BBC during this period. The fees that would have been paid will be deducted from his BBC contract.”
Mr Thompson said: “Jonathan Ross’s contribution to this edition of the Russell Brand show was utterly unacceptable and cannot be allowed to go uncensored or without sanction.
“A 12-week suspension is an exceptional step, but I believe it is a proportionate response to Jonathan’s role in this unhappy affair.
“Jonathan Ross has already made a comprehensive and unreserved personal apology to Andrew Sachs and his granddaughter. I believe that he fully understands the seriousness of what has happened.
“I have made very clear to him the central importance of the clause in his contract about not bringing the BBC into disrepute.
“We agree that nothing like this must ever happen again and that tight discipline will be required for the future.”