FIFA announced on Thursday that Blatter, alongside presidential candidate Michel Platini and general secretary Jerome Valcke, had been suspended for 90 days, following approval by the governing body's adjudicatory chamber of a recommendation made the organisation's ethics committee.
Those sanctions can be extended by up to 45 days, which would effectively end Blatter's reign over world football - with the FIFA congress where a replacement will be chosen scheduled for February 26 next year.
The investigation into Blatter's conduct relates to allegations that he signed an "unfavourable" contract with the Caribbean Football Union (CFU) in 2005, one that market experts claim handed over World Cup television rights for a fraction of their market value.
He is also accused of making a "disloyal payment" in 2011 to UEFA chief Platini, whose bid to replace Blatter as FIFA president appears all but over.
A FIFA statement read: "Today, in accordance with FIFA's Code of Ethics, Joseph S. Blatter was relieved of all his duties as FIFA President following the decision of the Independent Chairman of the Adjudicatory Chamber of the Ethics Committee to provisionally ban him from all football activities on a national and international level.
"Joseph S. Blatter, for the duration of the 90-day ban, is not allowed to represent FIFA in any capacity, act on the organisation's behalf, or communicate to media or other stakeholders as a FIFA representative.
"As mandated by article 32 (6) of the FIFA Statutes, Issa Hayatou, as the longest-serving vice-president on FIFA's Executive Committee, will serve as Acting President of FIFA."
Hayatou was elected president of the Confederation of African Football in 1988, and previously ran for the FIFA presidency in 2002 – which ended in a crushing defeat to Blatter.
The Cameroonian was accused in 2011 of accepting bribes in relation to the 2022 World Cup hosting rights, but was cleared following a FIFA investigation.
Blatter's lawyer said in a statement: "President Blatter was disappointed that the Ethics Committee did not follow the Code of Ethics and Disciplinary Code, both of which provide for an opportunity to be heard.
Further, the Ethics Committee based its decision on a misunderstanding of the actions of the Attorney General in Switzerland, which has opened an investigation but brought no charge against the President.
In fact, the prosecutors will be obliged by law to dismiss the case if their investigation, barely two weeks old, does not establish sufficient evidence.
President Blatter looks forward to the opportunity to present evidence that will demonstrate that he did not engage in any misconduct, criminal or otherwise."