The decision was taken an arbitration commission of the SPD's state unit in Lower Saxony, which investigated the child pornography allegations against 45-year-old Edathy.
The commission, however, rejected demands from the party's leadership in Berlin for his expulsion from the party.
The commission's investigations showed no sufficient reasons to dismiss him, commission chairman Juergen Dietze said in Hannover yesterday.
"The commission found no evidence for a major violation of the SPD's statutes by Mr Edathy. It also could not establish that his actions caused any serious harm for the party," Dietze told a news conference.
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He was accused of downloading child pornography photos and videos of under-aged children on seven occasions in November, 2013 using his official laptop in the Bundestag, the lower house of parliament and possessing an illustrated book and a CD containing such material.
Edathy, who repeatedly denied any wrongdoing, admitted for the first time in a statement read out at the court by his lawyer that the allegations against him "hold true".
The commission said that irrespective of their legality, the photos and videos of naked children acquired by Edathy were against the basic position and programmes of the SPD, which has been campaigning for the protection of children and against exploitation of minors.
Therefore, it ordered a three-year suspension of Edathy's membership.
Edathy, a former rising star of the SPD, unexpectedly laid down his seat in the Bundestag, lower house of parliament, on February 7, last year citing "health grounds".
Four days later, prosecutors opened an investigation against him on suspicion of involvement in a child pornography ring and raided his houses and offices in Berlin and in Lower Saxony.