The Fidesz party of firebrand Hungarian Prime Minister Viktor Orban was suspended from the European People's Party Wednesday, the EU's biggest and most influential political grouping, the EPP said.
The Nationalist Party voted in favour of the suspension.
A total 190 party members voted in favour of the suspension, with only three against, after reports of long and often heated discussions with Orban at a meeting in Brussels.
Fidesz had faced expulsion from the EPP after running a controversial billboard campaign that accused European Commission head Jean-Claude Juncker and liberal US billionaire George Soros, a bete-noire of Orban, of plotting to flood Europe with migrants.
The campaign has since been dropped and Orban has apologised for insulting partners from the EPP - the mainstream conservative group of MEPs - though the party leadership had warned this was not enough.
A statement said the suspension was a joint decision by Fidesz and the EPP in a last minute re-wording intended to stop Orban from slamming the door on the group forever.
Sanctioning Orban has split the EPP, amid concern that the Hungarian leader will team up with Italian Deputy Prime Minister Matteo Salvini, leader of Italy's anti-immigrant Northern League, to create a rival group in the European Parliament.
Faced with tough EU elections in May, some EPP members are also worried that punishing Orban will cost them support from anti-immigrant voters who back Orban's tough line.
But others believe Orban crosses a dangerous line into xenophobia, anti-semitism and racism that is not suitable for the EPP mainstream grouping.
The sanction against Orban has no end date, but party sources said senior party members would evaluate the situation and recommend next steps "probably in the autumn".
"Exclusion is not off the table, it is on the table," said the EPP's Manfred Weber, who will be leading the party in European elections in May.
The EPP brings together the EU's main centre-right parties, such as German Chancellor Angela Merkel's CDU or the Republicans in France, the party of former French leaders Nicolas Sarkozy and Jacques Chirac.
In an interview on Wednesday, Juncker, who won the EU's top office for the EPP in 2014, once again called for Fidesz to be excluded.
"For years (Orban's party) has been moving away from Christian Democratic values," Juncker told German radio Deutschlandfunk. Therefore "his place is outside the EPP".
The PN was represented by international secretary Roselyn Borg Knight, the head of the delegation in the EP David Casa, and MEPs Roberta Metsola and Francis Zammit Dimech.
PN leader Adrian Delia is on his way to Brussels to attend the EPP summit on Thursday, which is expected to discuss Brexit developments.