The United States said the decision marked a "critical juncture" for Syria and that it it was discussing with its allies the way ahead for a "political transition" as set out in two UN Security Council resolutions.
The unarmed observers have been targeted almost daily since deploying in mid-April to monitor a UN-backed but widely flouted ceasefire, and they were likened to "sitting ducks in a shooting gallery" by Susan Rice, the US envoy to the United Nations.
Explaining the suspension, mission head Major General Robert Mood spoke of an escalation in fighting and of the risk to his 300-strong team, as well as the "lack of willingness" for peace by the warring parties.
"There has been an intensification of armed violence across Syria over the past 10 days," Mood said in a statement. "This escalation is limiting our ability to observe, verify, report as well as assist in local dialogue and stability projects -- basically impeding our ability to carry out our mandate," he said.
"In this high risk situation, UNSMIS (United Nations Supervision Mission in Syria) is suspending its activities," Mood said. The observers "will not conduct patrols and will stay in their locations until further notice," the general said, adding that "engagement with the parties will be restricted."