Cruise's AVs posed an "an unreasonable risk to public safety," and "are not safe for the public's operation" California's Department of Motor Vehicles (DMV) said in a statement.
The suspension, which came after a series of accidents involving Cruise vehicles, is a significant setback to GM's self-driving technology unit and the nascent autonomous vehicle (AV) industry.
The suspension was effective immediately.
GM has previously insisted Cruise represents a "giant growth opportunity." In June, GM CEO Mary Barra reiterated a forecast that Cruise could generate $50 billion a year in annual revenue by 2030, a target the company has not backed away from.
The automaker reported on Tuesday that it lost $723 million on Cruise during the third quarter. The DMV added that Tuesday's "decision does not impact the company's permit for testing with a safety driver." Cruise said it "will be pausing operations of our driverless AVs in San Francisco."
Cruise said the California Department of Motor Vehicles reviewed an incident on Oct. 2, when one of its self-driving vehicles was putting on the brakes but did not avoid striking a pedestrian who a hit-and-run driver had previously struck.
Cruise said that in that incident, "a human hit and run driver tragically struck and propelled the pedestrian into the path of the AV" which struck the pedestrian. "When the AV tried to pull over, it continued before coming to a final stop, pulling the pedestrian forward," the company said.
"Our teams are currently analysing to identify potential enhancements to the AV's response to this kind of extremely rare event," it added. In August, the regulator said it was investigating "concerning incidents" involving autonomous vehicles operated by Cruise in San Francisco and asked the company to take half its robotaxis off the roads.
Another incident involved a Cruise robotaxi in a crash with an emergency vehicle in San Francisco. Barra said the Cruise robotaxis have better safety records than human drivers.