The AU's Peace and Security Department said in a post on Twitter on Thursday that Sudan's participation in all AU activities would be suspended with immediate effect - "until the effective establishment of a civilian-led transitional authority", which it described as the only way to "exit from the current crisis", Al-Jazeera reported.
The announcement followed an emergency meeting by the AU in Addis Ababa, Ethiopia, after the violent dispersal of a protest camp in the Sudanese capital, Khartoum, began on Monday.
At least 108 people have been killed and more than 500 wounded, according to the Central Committee of Sudanese Doctors (CCSD), while a health ministry official was quoted as saying the death toll stood at 61.
Sudan's pro-democracy leaders have vowed to continue their campaign of civil disobedience until the Transitional Military Council (TMC) - which has ruled Sudan since longtime leader Omar al-Bashir was overthrown in a coup in April - is removed and killers of protesters are brought to justice.
The Sudanese Professionals Association on Thursday asked people to block main roads and bridges to "paralyse public life" across the country in retaliation for the military crackdown.
In response to the killings, AU Commission Chairman Moussa Faki Mahamat on Monday called for an "immediate and transparent investigation in order to hold all those responsible accountable".
The AU had earlier warned of suspension if Sudan's military did not hand over power, but extended the deadline on Saturday after the previous one was ignored. The AU has met some criticism over its response to the crisis.
Political analyst Joseph Ochieno told Al-Jazeera before the suspension announcement that the emergency meeting was "coming rather late".
The CCSD announced that 40 bodies were pulled from the Nile River on Tuesday and taken to an unknown location by the paramilitary Rapid Support Forces (RSF). The TMC has not commented on the allegations.
The raid on Monday marked a pivotal moment in the weeks-long struggle between the powerful TMC and opposition groups over who should lead Sudan's transition to democracy.
General Abdel Fattah al-Burhan, the head of the TMC, said it was ready to resume negotiations with the opposition coalition. But the opposition rejected the offer, saying the military could not be trusted.
Speaking about the TMC's hard line approach, Ochieno told Al-Jazeera it was unclear what the ruling generals were trying to achieve with their violent response.
"If it is a way to negotiate … in this day and age, it is rather unusual," stated Ochieno, adding, "If part of their trips to Saudi Arabia and Egypt were to show power and intimidate the opposition, they have actually galvanised the entire of Sudan."
"Some of these guys have extensions to the genocide in Darfur. They thought perhaps the old system of general intimidation and use of excess power and violence - to which they subjected the people of Sudan elsewhere - could be attempted in the streets of Khartoum in broad daylight," Ochieno noted.
The RSF, accused of dispersing the protest camp with gunfire, grew out of the Janjaweed militia that human rights groups accuse of committing war crimes - including killings, rape and torture of civilians - in Sudan's Western region of Darfur after the outbreak of conflict there in 2003.
On Thursday, the United Nations pulled all non-critical members of staff from Sudan amid concerns over the violence.
The United States has called on Sudan's military rulers to "desist from violence" and urged talks with protesters to resume.
"The United States condemns the recent attacks on protesters in Sudan," State Department Spokeswoman Morgan Ortagus said in a statement on Wednesday.
Russia announced on Thursday it opposed foreign intervention in Sudan and the authorities in Khartoum must subdue what it described as "extremists", Russia's RIA news agency reported.
Deputy Foreign Minister Mikhail Bogdanov was quoted as saying Moscow favoured a national dialogue about a transition period leading to new elections.
"Naturally, in order to do that, you need for order to be imposed, and you need to fight against extremists and provocateurs who don't want the stabilisation of the situation," RIA quoted Bogdanov as saying.
"That's the situation right now, but we are against any external intervention, the imposition of anything on the Sudanese," he added.
He did not identify which groups he considered to be "extremists" and provocateurs.
David Shinn, a former senior US diplomat in Sudan, stated that the prospect for talks was dim as long as the violence continued.
"You cannot have successful negotiations between the protest groups and the military so long as the security forces are killing fellow Sudanese. This has to stop. Until it does, I don't see any prospect for meaningful negotiations," he told Al-Jazeera.
Ethiopian Prime Minister Abiy Ahmed is expected in Khartoum on Friday to launch mediation efforts.