Paul pleaded not guilty to resisting a peace officer and consumption of liquor by a minor after his arrest on campus last month.
The 20-year-old sophomore is the brother of former Illini star Brandon Paul and was due to see his first action at Illinois next season. He sat out last season under NCAA rules after transferring from Western Michigan.
Groce said the decision to suspend Paul was made with the team's best interests in mind. Groce said he believes the penalty is necessary to "help Darius as a person."
Assistant sports information director Derrick Burson said Paul's scholarship is revoked for next season.