The ATP ordered a USD 25,000 (22,700 euros) fine and said a three-week ban would be increased to eight weeks if the 21-year-old Kyrgios did not seek help for his temper.
The world number 14 gave away points and swore and argued with fans before being booed off court after his 6-3, 6-1 defeat by Mischa Zverev in his second round match last week.
Tennis Australia said in a statement that it would support Kyrgios.
Kyrgios apologised again for his behaviour in Shanghai.
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"The season has been a long one as I battled several injuries and other challenges towards the end of the summer," he said in a statement.
"My body finally just gave out in Shanghai both physically and mentally.
"This is no excuse, and I know very well that I need to apologise to the fans - in Shanghai and other parts of the world - as well as the tournament organisers in Shanghai who do an amazing job."
"I do understand and respect the decision by the ATP and I will use this time off to improve on and off the court."
The USD 25,000 ATP fine will be added to a $16,500 penalty ordered last week.
The Shanghai outburst was the latest in a long line of incidents involving the Australian. Last year he was given a suspended one-month ban for making comments to Stan Wawrinka about his wife.
"Nick's conduct in Shanghai was unacceptable, disrespectful to the sport and its fans," said ATP executive chairman Chris Kermode.
The ATP said that after an investigation into the
Australian's second round match in Shanghai, Kyrgios had been found guilty of conduct contrary to the integrity of the game.
This meant an additional fine and an immediate eight week suspension.
"However, the suspension will be reduced to three tournament weeks upon agreement that the player enters a plan of care under the direction of a sports psychologist, or an equivalent plan approved by ATP."
If Kyrgios agrees to see a psychologist he could return to the tour on November 7, after the three week ban.
"We have spoken to his management and Nick has agreed to seek the help of a sports psychologist and will now be available to play in the Hopman Cup in early January," a Tennis Australia spokesperson told AFP.