Some Russian athletes will be allowed to compete at PyeongChang 2018 in certain circumstances under the name "Olympic Athlete from Russia" and will compete in uniform bearing that name, the IOC said.
However, the country's government officials are forbidden to attend, its flag will not be displayed at the opening ceremony and its anthem will not sound.
The unprecedented punishment is for executing an extensive state-backed doping program at the 2014 Sochi Olympics.
Russian authorities refuse to acknowledge there was a state conspiracy to corrupt the Sochi Olympics - a key condition insisted on by World Anti-Doping Agency.
Russia blames individuals for the doping programme, and wants whistleblower Grigory Rodchenkov - the former director of the Moscow and Sochi labs - to be extradited from the United States. Rodchenkov is in a witness protection programme after fleeing to the US and alleging to American media last year how the Sochi doping system worked.
The IOC has banned Russian Deputy Prime Minister Vitaly Mutko for life from the Olympics for his role in the country's doping program.
Mutko, who was sports minister at the time of the 2014 Sochi Olympics, remains head of the 2018 World Cup organising committee.
IOC commission chairman Samuel Schmid says the doping program "was under the authority of the Russian sports ministry. That is why the then sports minister has responsibility for the failure of this system."
The New Zealand Olympic Committee backed the move, saying the sanctions send a strong message in support of a level playing field for all athletes and the integrity of the Olympic Game
Photo by: Chung Sung-Jun/ Getty Images. Caption: The 2018 Winter Olympics are to be held in PyeongChang, Korea.