La Liga club, Valencia have been fined €45,000 and will have to close the stand where Vinicius Jr was racially abused for five games after a ruling by the Spanish FA.
The Mario Kempes stand, where the chants targeting Vinicius originated in Valencia's 1-0 win over Real Madrid on Sunday, will be closed for Valencia's one remaining home game this season and the first four matches of next season.
Vinicius' red card, issued in the wake of the abuse suffered in Valencia's victory over Real Madrid on Sunday night, has also been overturned by the Spanish FA (RFEF).
In a statement, the RFEF said: "The Competition Committee has sanctioned Valencia CF with the partial closure of the Mestalla stadium for five matches, specifically the Mario Kempes South Stand, following the events that occurred during the match between the team and Real Madrid.
"It is considered proven that, as reflected by the referee in his report, there were racist shouts at Vinicius, altering the normal course of the match and the infractions are considered very serious.
"In addition, an economic sanction of €45,000 is imposed on Valencia."
In its full report, the RFEF found proven that Vinicius was subject to racist abuse when the Real Madrid bus first arrived at the Mestalla.
During the game, it added he had objects thrown at him in the 71st minute from the Kempes Stand, before racist chanting followed in the 73rd minute - when the referee first alerted the match delegate to make an announcement over the PA system.
Spanish police have arrested seven men in connection with separate racist incidents aimed at Vinicius Junior
Four were detained on suspicion of hanging an effigy of Vinicius from a bridge in Madrid in January, with police saying three of the men are a "radical group of fans of a Madrid group" that were previously flagged as "high risk".
The effigy was hung on the morning of a Copa del Rey fixture between Real and city rivals Atletico Madrid, along with the words "Madrid hates Real".
Three other men were arrested in Valencia on Tuesday in connection with the racist abuse aimed at Vinicius during Real Madrid's 1-0 defeat at the Mestalla on Sunday.
Real have reported the abuse as a hate crime, while the winger responded by saying LaLiga "belongs to the racists".
Vinicius was targeted by chants from sections of the crowd, with the game being stopped in the second half for 10 minutes as the visibly angry 22-year-old grabbed the referee and pointed towards fans who he felt had abused him.
He was later sent off for violent conduct in added time following an altercation with striker Hugo Duro.
The Brazil international has repeatedly been targeted with racist abuse, with LaLiga filing nine criminal complaints in the last two seasons.
On Tuesday May 23, he took to Twitter to post a video from 1997 detailing racist attacks carried out by football fans in Spain, and captioned the post: "Racism in Spanish stadiums existed even before I was born.
"What has changed until today?"
LaLiga has called for a change to Spanish law in order to be given sanctioning powers to help it fight racism more effectively.
At present, LaLiga can only identify and report cases, but will now seek an amendment to the law that also enables it to bring disciplinary action.
