McCarrick, 88, the former archbishop of Washington, D.C., is the first cardinal in living memory to lose his red hat and title. Other cardinals who have been disciplined in sexual abuse scandals kept their membership in the College of Cardinals and their honorific "your eminence".
The allegations against McCarrick, which first surfaced publicly last month, came with Francis facing an image crisis on a second front, in Chile, where a growing abuse scandal has enveloped the Church in the Latin American country.
A Vatican statement said the pope ordered McCarrick's suspension from the exercise of any public ministry. This means he remains a priest but will be allowed to say Mass only in private.
Francis also ordered McCarrick to go into seclusion "for a life of prayer and penance until the accusations made against him are examined in a regular canonical trial".
McCarrick's sudden fall from grace stunned the American Church because he was a widely respected leader for decades and a confidant of popes and presidents.