The measure takes effect immediately, said NBC yesterday, which is under growing pressure to fire the 55-year-old Williams, who reportedly earns about USD 10 million a year and has scooped up more than two dozen industry awards during his glittering journalism career.
Williams' on-air "misrepresentation" of how he came under fire in Iraq in 2003 was "wrong and completely inappropriate for someone in Brian's position," Deborah Turness, president of NBC news, said in a statement on its website.
"We let Brian know of our decision earlier today. Lester Holt will continue to substitute anchor the NBC nightly news."
NBC took action as it conducts an internal review into the embattled Williams' reporting.
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NBCUniversal chief executive Steve Burke called Williams' actions "inexcusable," before adding: "He deserves a second chance and we are rooting for him."
Williams, who is watched by an estimated nine million Americans each night and is one of the most recognisable faces on US television, hauled himself off the air at the weekend for "several days."
His on-air apology last week only fanned the flames, with critics refusing to accept Williams simply made an honest mistake.
Hinting at wider issues about Williams' reporting, amid claims he had exaggerated other stories, Turness added: "In addition, we have concerns about comments that occurred outside NBC news while Brian was talking about his experiences in the field.