The ruling comes just nine months before France is due to host the 2023 Rugby World Cup.
The president of the French rugby federation has been fined and handed a two-year suspended sentence for corruption.
Bernard Laporte stepped down as World Rugby’s vice-chairman on Tuesday after the Paris court's decision.
He was found guilty of passive corruption, influence peddling, illegal interest-taking, and misuse of corporate assets. Laporte was banned from holding any position in rugby for two years and fined €75,000.
The verdict comes just nine months before France is due to host the Rugby World Cup in September 2023.
According to the AFP news agency, Laporte had shown favouritism by awarding a shirt sponsor contract to close friend Mohed Altrad, the billionaire owner of Top 14 club Montpellier.
Altrad was also found guilty of active corruption, influence peddling, and misuse of corporate assets and handed an 18-month suspended sentence, as well as a €50,000 fine.
World Rugby said Laporte has decided to “self-suspend from all positions held within its governance structures with immediate effect”.
The matter has been referred to the world governing body's independent ethics officer.
French sports minister Amélie Oudéa-Castéra said Laporte's sentencing had put him in an untenable situation and called on the French federation to also act.
Laporte's lawyer has indicated that he would appeal the ruling. Both men have denied wrongdoing.
In 2017, the French rugby boss was accused of pressuring the federation's board to reduce sanctions on Montpellier.
In November, financial prosecutors raided the headquarters of France's 2023 Rugby World Cup organisers as part of a government inquiry into the management of the organising committee.