Commissioner Adam Silver said he will try to force the controversial owner to sell his franchise. Sterling has also been fined $2.5 million, and Silver made no effort to hide his outrage over the comments.
"I fully expect to get the support I need from the other NBA owners I need to remove him," Silver said.
The rebuke, which came three days after the scandal broke, is the harshest penalty ever issued by the league and one of the stiffest punishments ever given to an owner in professional sports. Silver said a league investigation found the NBA's longest-tenured owner was in fact the person on the audiotapes that were released over the weekend.
"We stand together in condemning Mr. Sterling's views," Silver said. "They simply have no place in the NBA."
Sterling acknowledged he was the man on the tape, Silver said.
Sterling is immediately barred from attending any NBA games or practices, be present at any Clippers office or facility, or participate in any business or player personnel decisions involving the team.
He also cannot participate in any league business going forward. It's unclear how he will respond, and a lawsuit certainly seems possible.
"This league is far bigger than any one owner, any one coach and any one player," Silver said.
The fine will be donated to organizations dedicated to anti-discrimination and tolerance efforts that will be jointly selected by the NBA and the Players Association, Silver said.
"This has all happened in three days, and so I am hopeful there will be no long-term damage to the league and to the Clippers organization," Silver said. "But as I said earlier, I'm outraged so I certainly understand other people's outrage. This will take some time and appropriate healing will be necessary."
After the announcement, the Clippers' website had a simple message: "We are one," it read.
"We wholeheartedly support and embrace the decision by the NBA and Commissioner Adam Silver today. Now the healing process begins," the Clippers added in a statement released to the media.
Sterling's comments were released over the weekend by TMZ and Deadspin, and numerous NBA owners and players have condemned them. Even President Barack Obama weighed in on the crisis, the first of Silver's brief tenure as commissioner.
The league's investigation started Saturday and players immediately began expressing intense displeasure with the situation, even going so far as to ask Sacramento Mayor Kevin Johnson to get involved on behalf of the players' union.
"Commissioner Silver thank you for protecting our beautiful and powerful league!! Great leader!!," Miami Heat star LeBron James wrote on Twitter.
Before Silver took the podium, Dallas Mavericks owner Mark Cuban tweeted out a photo of the NBA Constitution, saying "It exists for a reason."
The announcement of the sanctions came just hours before the Clippers will play Golden State in Game 5 of a knotted-up Western Conference first-round playoff series.
Several sponsors either terminated or suspended their business dealings with the team on Monday, though individual deals that some of those companies have with Clippers stars like Chris Paul and Blake Griffin will continue and were not affected. Still, it was a clear statement that companies, like just about everyone inside the league, were outraged.
"Commissioner Silver showed great leadership in banning LA Clippers owner Donald Sterling for life," Magic Johnson, who was referenced on the taped conversation involving Sterling, tweeted shortly after the league's decision was announced.
Johnson's role on the tape stemmed from Sterling's female companion apparently posting a photo of her and the Hall of Fame player on her Instagram account. That photo has since been deleted, but raised Sterling's ire nonetheless.
"It bothers me a lot that you want to broadcast that you're associating with black people. Do you have to?" Sterling asks the woman on the tape.
Silver said when he first heard the audio, he hoped it had been altered or was fake - but also said that from his 20-year relationship with Sterling, he suspected the voice was his.
The issues raised when the tapes were released over the weekend represent just another chapter in Sterling's long history of being at the center of controversy.
In the past, he's faced extensive federal charges of civil rights violations and racial discrimination in his business dealings, and some of his race-related statements would be described as shocking.
He has also been sued in the past for sexual harassment by former employees, and even the woman who goes by the name "V. Stiviano" - purportedly the female voice on the tapes at the center of this scandal - describes Sterling in court documents as a man "with a big toothy grin brandishing his sexual prowess in the faces of the Paparazzi and caring less what anyone else thought, the least of which, his own wife."
Stiviano is being sued by Rochelle Sterling, who is seeking to reclaim at least $1.8 million in cash and gifts that her husband allegedly provided the woman.