Payton is the first head coach suspended by the league for any reason. He is accused of trying to cover up a system of extra cash payouts that NFL Commissioner Roger Goodell called "particularly unusual and egregious" and "totally unacceptable."
"We are all accountable and responsible for player health and safety and the integrity of the game. We will not tolerate conduct or a culture that undermines those priorities," said Goodell, whose league faces more than 20 concussion-related lawsuits brought by hundreds of former players. "No one is above the game or the rules that govern it."
According to the league, Payton, whose salary this season was to be at least $6 million, ignored instructions from the NFL and Saints ownership to make sure bounties weren't being paid. The league also chastised Payton for choosing to "falsely deny that the program existed" and for attempting to "encourage the false denials by instructing assistants to 'make sure our ducks are in a row.' "
In addition, Goodell fined the Saints $500,000 and took away their second-round draft picks this year and next.
"To our fans, the NFL and the rest of our league, we offer our sincere apology and take full responsibility for these serious violations," the team's statement reads.
"There is no place for bounties in our league and we reiterate our pledge that this will never happen again," it continues.
Goodell will review Williams' status after the upcoming season and decide if he can return to the league.
Sources close to Williams told NFL Network insider Jason La Canfora that they were shocked by the news. The sources said they had been expecting a shorter suspension, something like a month or six games, and had been hoping for a ban that would last less than half a season.
The Saints now must decide who will coach the team while Payton is barred -- his suspension is effective April 1 -- and who will make roster moves while Loomis is out.
In a memo sent out to the NFL's 32 teams, Goodell ordered owners to make sure their teams aren't offering bounties now. Each team's principal owner and head coach must certify in writing by March 30 that no pay-for-performance system exists.
Punishment for any Saints players involved will be determined later, because the league is still reviewing the case with the NFL Players Association.
As recently as this year, Payton said he was entirely unaware of the bounties -- "a claim contradicted by others," the league said. And according to the investigation, Payton received an email before the Saints' first game in 2011 that read, "PS Greg Williams put me down for $5000 on Rogers (sic)." When Payton was shown that email by NFL investigators, he acknowledged it referred to a bounty on Rodgers, whose Packers beat the Saints in Week 1.
The league said that in addition to contributing money to the bounty fund, Williams oversaw record-keeping, determined payout amounts and who got cash, and handed out envelopes with money to players. The NFL said Williams acknowledged he intentionally misled NFL investigators when first questioned in 2010 and didn't try to stop the bounties.
Vitt was aware of the bounties and, according to the league, later admitted he had "fabricated the truth" when interviewed in 2010.
The Associated Press contributed to this report.