The decision meant the Kingston Flyer Ltd's 11 staff would be laid off.
David Bryce said the safety of staff, passengers and the public was of ''paramount importance'' to the company, meaning it had no choice but to suspend the service. It was hoped it would be back up and running next month.
The suspension meant those who had made bookings up until mid-January would need to contact the company to either rebook or seek a refund, Mr Bryce said.
He also announced that, 18 months after buying the Kingston Flyer from receivers, he was putting the business on the market due to concerns that running it was having a detrimental effect on his health.
''I now feel that I need to step back from the operation for a potential new operator to run the business,'' he said.
The decision to suspend operations was not caused by a specific incident, but because leaks in the boiler of its Ab 778 locomotive had the potential to grow into cracks and in a worst-case scenario cause the boiler to explode.
The Flyer would remain out of service until ''extensive repairs'' on the company's other locomotive (Ab 795) were finished - which was expected by the middle of next month at the latest. Rather than fixing the leaky Ab 778, the company had decided to focus its efforts on Ab 795, which had been undergoing repairs since last June.
This meant Ab 778 would be retired from service until funding became available for an extensive overhaul.
When it came to the decision to put the business on the market, he said the stresses of operating it had been detrimental to his health after he suffered a stroke close to the time he bought it from receivers a year and a-half ago.
He said he and his staff had put their ''heart and soul'' into running the Kingston Flyer, but that the time was right to move on.
''I need to look after myself first of all."
He said the suspension of the Kingston Flyer would not affect its long-term future, because once it was up and running again it would be with a ''good as new'' boiler, he said.
The Kingston Flyer, which was originally a passenger train service between Kingston and Gore founded in the 1890s, now operates on a 14km stretch of track between Kingston and Fairlight at the southern end of Lake Wakatipu.