Sherin, who was adopted by an Indian-American couple in 2016, died in October last year allegedly from choking after her adoptive father "physically assisted" her with drinking milk.
Both the adoptive parents are in jail. An autopsy report recently ruled that Mathews died because of "homicidal violence".
Women and Child Development Minister Maneka Gandhi took the decision to suspend the Authorised Foreign Adoption Agency (AFAA), Holt International, government sources said.
They added, that the government has written to the Indian Embassy in the US, the Central Authority (CA), which is the nodal body for adoptions in the US, and Holt International, informing them about the decision.
"We have suspended the operations of Holt International because we found it negligent in the assessment of the adoptive parents and also in the post placement assessment of the family," CEO, CARA (Child Adoption Resource Authority), Lt Col Deepak Kumar, said.
He added that a decision on cancelling the AFAA's authorisation will be taken after detailed reports from the Indian Embassy as well as the CA.
While the death of Sherin came to light in October, the government delayed acting against the AFAA because of Ivanka Trump's visit to India in November, it is reliably learnt from different government officials.
Minister of External Affairs Sushma Swaraj had also sought a probe into the "adoption process" of Sherin in October.
A grand jury this month is expected to review charges filed against the girl's adoptive parents.
The father, Wesley Mathews, is under arrest on the charge of injury to a child, punishable up to life in prison.
The adoptive mother, Sini Mathews, has been charged with child endangerment or abandonment relating to the death punishable by up to two years in jail.
Following the incident, India's nodal body for adoption CARA (Child Adoption Resource Authority), has made mental well-being of overseas applicants seeking to adopt a child an important criterion for determining their eligibility.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)