Sinn Fein MP Barry McElduff, who posted a social media video of him with a loaf of Kingsmill bread on his head on the anniversary of the Kingsmill massacre, has been suspended from all party activity for three months, he has confirmed.
Party chairman Declan Kearney had earlier said the West Tyrone MP had fallen well short of the standards Sinn Fein expects of its members.
Mr McElduff has apologised for the post, insisting it was not meant as a reference to the republican murders of 10 Protestant workmen in 1976.
He was summoned to a crunch meeting with the Sinn Fein leadership in Northern Ireland on Monday afternoon - and has confirmed his suspension.
The well-known Kingsmill brand of bread shares a name with the south Armagh village that witnessed one of the most notorious incidents of the Troubles, when gunmen stopped a van carrying textile workers on their way home, identified the Protestant occupants, lined them up at the side of the road and shot them.
Mr Kearney became the first senior leadership figure to comment on the weekend furore on Monday morning.
"What has happened is absolutely inexcusable and indefensible and the party is taking this matter very seriously indeed," he said.
He added that Sinn Fein wished to express "deep and sincere regret".
"What happened is absolutely irresponsible," he told BBC Radio Ulster.
"Barry McElduff has already made an unreserved apology and that was the correct thing to do in the circumstances.
"The reality is huge offence has been caused and I and Sinn Fein strongly disapprove of what has happened."
The Police Service of Northern Ireland is examining the video after receiving a number of complaints, while the Parliamentary Commissioner for Standards at Westminster has also been alerted.
In the short video, Mr McElduff, who is known for his light-hearted social media contributions, is filmed walking around a shop with a Kingsmill loaf on his head, asking where the store kept the bread.
It was posted around the 42nd anniversary of the Kingsmill outrage.
More to follow