The battalion will undergo a "process aimed at reinforcing its professional and ethical foundations", the military said on Telegram on Monday.
The CNN team had been documenting the aftermath of an attack by Israeli settlers and the establishment of an illegal outpost when, according to the journalists, they were assaulted and detained by soldiers.
CNN filmed the incident and correspondent Jeremy Diamond wrote on X that soldiers attacked a photojournalist and held the team.
The Foreign Press Association said the journalists had clearly identified themselves but the soldiers repeatedly tried to prevent filming.
One soldier allegedly put a CNN reporter in a chokehold, threw him to the ground and damaged his camera. The FPA described the incident as a direct assault on press freedom.
The Israeli military has opened an investigation into the incident.
The unprecedented suspension of a full battalion is intended as a deterrent for other troops, according to Israeli news site ynet.
Soldiers from the unit reportedly expressed shock at what they called a collective punishment.
Such a battalion typically comprises several hundred soldiers.
Israel seized the West Bank and East Jerusalem in 1967.
Some 700,000 Israeli settlers now live there, alongside three million Palestinians.
The Palestinians claim the territories for their own state, with East Jerusalem as its capital.
Since the start of the Gaza war more than two years ago, violence by extremist settlers against Palestinians has increased significantly.
Israeli security forces have repeatedly faced accusations of failing to act decisively against such incidents or even siding with aggressive settlers.
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