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The decision, which was applauded by many current and former tennis players, could cost the US-headquartered WTA hundreds of millions of dollars in broadcasting and sponsorship.
Peng's whereabouts became a matter of international concern following a nearly three-week public absence after she posted a message on social media in early November alleging that China's former Vice-Premier Zhang Gaoli had sexually assaulted her.
Neither Zhang, who retired in 2018, nor the Chinese government have commented on Peng's allegation and the topic has been blocked from direct discussion on China's heavily censored internet.
"I don't see how I can ask our athletes to compete there when Peng Shuai is not allowed to communicate freely and has seemingly been pressured to contradict her allegation of sexual assault," WTA Chief Executive Steve Simon said in a statement on Wednesday.
"Given the current state of affairs, I am also greatly concerned about the risks that all of our players and staff could face if we were to hold events in China in 2022."
The decision comes as Beijing is preparing to host the Winter Olympics in February next year. Global rights groups and others have called for a boycott of the Beijing Olympics over China's human rights record.
Peng did appear in mid-November at a dinner with friends and a children's tennis tournament in Beijing, photographs and videos published by Chinese state media journalists and by the tournament's organisers show.
On November 21, IOC president Thomas Bach had a 30-minute video call with Peng - a three-times Olympian - during which she told him she was safe and with family and friends.
But Simon, who said the decision to suspend tournaments in China, including Hong Kong, had the full support of the WTA Board of Directors, said they were not convinced all was well with Peng.
"While we now know where Peng is, I have serious doubts that she is free, safe, and not subject to censorship, coercion, and intimidation," said Simon.
"The WTA has been clear on what is needed here, and we repeat our call for a full and transparent investigation – without censorship - into Peng Shuai's sexual assault accusation."
The Chinese embassy in Washington did not immediately respond to a request for comment.
Simon, who took over as head of the WTA in 2015, called the situation with Peng one that demanded a response.
"If powerful people can suppress the voices of women and sweep allegations of sexual assault under the rug, then the basis on which the WTA was founded - equality for women - would suffer an immense setback. I will not and cannot let that happen to the WTA and its players."
American tennis great and founder of the WTA Billie Jean King was among those who applauded the WTA's announcement.
"The WTA has chosen to be on the right side of history in defending the rights of our players," King said in a statement. "This is yet another reason why women's tennis is the leader in women's sports."
Former men's world No 1 Andy Roddick also commended the WTA.
"There are a lot of organisations who can afford to do something like this a lot more than the WTA can... Respect," Roddick wrote on Twitter. "Doing the right thing is a lot easier when there aren't associated costs. I continue to be proud to be in the tennis orbit."
The WTA's aggressive expansion into China began just before the 2008 Beijing Olympic tennis tournament, and local interest in the sport was fuelled by Li Na winning the 2011 French Open.
In 2008, China hosted just two WTA events. That grew to nine by 2019.
In 2018, the city of Shenzhen bagged a 10-year deal to host the season-ending WTA Tour finals with a breath-taking bid that doubled the prize pot to $US14 million ($NZ20.5 million) a year.
The WTA had also announced a 10-year deal starting 2017 with streaming platform iQiyi as its digital rights partner in China, reportedly worth $US120 million.
With the Covid-19 pandemic, many sporting events were cancelled in 2020 and 2021 and the WTA removed its Asian swing events, including this year's Tour final, which took place in Mexico. It is unclear when the next WTA event in China was scheduled to take place.
Simon had previously said the WTA would walk away from China if it was not satisfied with the response to Peng's allegations.
"Unless China takes the steps we have asked for, we cannot put our players and staff at risk by holding events in China," said Simon on Wednesday.
"China's leaders have left the WTA with no choice. I remain hopeful that our pleas will be heard and the Chinese authorities will take steps to legitimately address this issue."