Redding was arrested earlier this month after police, investigating a car accident on campus, discovered marijuana in his parked car. He was charged by Radnor (Pa.) Township police with possession of a "small amount" of marijuana and drug paraphernalia.
The university said Redding had lost his status as a "student in good standing" for the fall 2009 semester.
The punishment will allow Redding to remain enrolled in school and practice with the team, but he cannot play in any games until the fall semester ends on Dec. 18, the university said.
Villanova's schedule is not yet finalized, so it's not clear exactly how many games Redding will miss. But he will definitely be out of the Tip-Off tournament in Puerto Rico in November.
In a university statement announcing the discipline, coach Jay Wright said he supported the decision.
"I believe the process was respectful and fair to Reggie. He is a quality person, who, with the support of his great family, met this head-on and has learned a valuable lesson from this experience," Wright said.
Redding played in all 38 games for the Wildcats last season, averaging 7.1 points, 4.9 rebounds and 3.1 assists per game. It was his lob pass that set up Scottie Reynolds' buzzer-beating shot against Pittsburgh in last season's NCAA tournament, allowing Villanova to reach the Final Four.
Dana O'Neil covers college basketball for ESPN.com.