The defending women’s Olympic champions have been deducted six points and head coach Bev Priestman received a one-year ban from world governing body Fifa.
Canadian Soccer Association (CSA) officials Joseph Lombardi and Jasmine Mander have also been suspended from all football activities for a year.
Carla Qualtrough, Canada’s sports minister, said the move to send a drone to monitor New Zealand’s training session was “cheating”.
She described the issue as “deeply regrettable” and said it was causing “significant distraction and embarrassment for Team Canada and all Canadians”.
“It is completely unfair to Canadian players and to opposing teams. It undermines the integrity of the game itself,” Qualtrough added.
“Given that the women’s programme receives funding from Sport Canada, we are withholding funding relating to suspended Canada Soccer officials for the duration of their Fifa sanction.”
Sport Canada is the government-led national body that helps to fund elite level national organisations.
On Friday, Canadian Olympic Committee chief executive David Shoemaker said there appeared to be “information that could tarnish” the team’s women’s football gold medal from the Tokyo Games.
It followed Canadian media reports that drones had been used at previous tournaments.
Qualtrough added: “There is a deeply concerning pattern of behaviour at Canada Soccer.
“We must, and will, get to the bottom of this. The government of Canada will closely monitor the investigation and outcomes of the Canada Soccer process that is under way.
“The Future of Sport in Canada Commission is also under way which will make recommendations to the government on improvements to the Canadian sport system.”
Canada, led by assistant coach Andy Spence in Priestman’s absence, beat New Zealand to claim three points in their opening Group A game in France.
Fifa’s sanction, however, leaves them on minus three points with games against the host nation and Colombia to follow.
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