Slamming the court decision as "blatantly unconstitutional" and "clear political targeting," the party also said it would boycott meetings of the ruling State Administration Coalition while its MPs would boycott parliament sessions.
The Iraqi Federal Supreme Court's surprise decision up-ended the career of Iraq's most powerful Sunni Muslim politician and sets the stage for a fight over succession.
Resignations by the country's planning, industry and culture ministers also destabilises the government of Prime Minister Mohammed Shia al-Sudani, who came to power one year ago backed by a coalition that is led by a group of Shi'ite Muslim parties but also includes Sunni Muslim Arabs and Kurds.
State media said the court decision, which is final and not subject to appeal, was related to a Federal Supreme Court case brought against Halbousi earlier this year, without elaborating.
Local media, MPs and analysts said the decision was related to alleged forgery on the part of Halbousi.
Halbousi's office could not be reached for comment.
Re-elected in 2021, Halbousi was serving his second term as Speaker, a post he assumed in 2018 and which, under the sectarian power-sharing system established after the 2003 US invasion, is the highest office reserved for a Sunni Muslim.
Under the governing system in place since the post-Saddam Hussein constitution was adopted in 2005, the prime minister is a member of the Shi'ite Muslim majority, the Speaker is a Sunni and the largely ceremonial role of president is held by a Kurd.
This sectarian formula has often come under heavy strain as a result of competing agendas and has divided the spoils of massive oil wealth between powerful factions while failing to prevent bloodshed or provide people with basic services.
Halbousi, a 42-year-old engineer from western Iraq who worked as a US contractor after the invasion, cultivated good relations and made deals with powerful Shi'ite and Kurdish factions, who helped his rapid rise to power.
More recently, he lost support within Iraq's ruling Shi'ite alliance, the Coordination Framework (CF), after he tried to form a government with their opponents following 2021 parliamentary polls.
Though he ultimately joined the CF in government, the damage was done, and he was seen as untrustworthy and as accumulating too much power due to his push to rally Sunnis, who were politically divided since 2003, into a unified front, analysts say.
"The narrative around Halbousi is that he rose too quickly and made a lot of enemies in the process," said Renad Mansour, director of the Iraq Initiative at London's Chatham House think tank.
"He has been punished by the central government through legal mechanisms because of this."
"Weakened opponents put the ruling Shi'ite parties in a better position. They are in a better position when Sunnis or Kurds are divided and fighting internal disputes," Mansour said.
Critics have said Iraq's judicial system is widely subject to political influence although top judges say it is an independent branch of government.
Lawmakers had gathered for a regular parliamentary session with the Speaker in the chamber when the decision was issued but Halbousi then exited, MP Amer al-Fayiz told Reuters.
Deputy speaker Mohsen al-Mandalawi, a Shi'ite, takes over as interim speaker until a new Speaker is elected.
Halbousi's ouster comes just over a month before Iraq holds elections for provincial councils that last took place a decade ago.
