The suspension follows recent unrest among grassroots members and moves to deselect the MP by some members of the Wallasey Labour Party after she announced she planned to challenge the Labour leader - despite calls by local party members to support Jeremy Corbyn.
Her decision came after Smith won the backing of more MPs in a process of selecting a single candidate to challenge Corbyn.
It is understood Eagle withdrew to prevent the publication of the names on her list in the hope of avoiding creating rival camps among anti-Corbyn MPs.
Bristol West MP Thangam Debbonaire is thought to have nominated Angela Eagle for leader, but will switch her allegiance to Mr Smith, having already written of her dissatisfaction with Mr Corbyn's reign.
But Mr Corbyn too was making a last-minute drive to get his backers to sign up, and thousands of new supporters are expected to rush to register for a vote in the last hours before the electorate is finalised.
Elements within the Labour party are actively preventing members who from taking part in the leadership election if they are suspected of being pro Corbyn, according to one Labour member.
"I believe Owen can build a Labour Party and a country of which we can be proud". He had also refused to criticise Jeremy Corbyn's leadership, until very recently, and was even tipped to be offered a Shadow Cabinet position until he described Corbyn's position as "untenable" following the European Union referendum. Interestingly, more than a third of members also associate Corbyn with a likely defeat in 2020, while only 20 percent see Smith as a liability.
He said: "I am just as radical as Jeremy Corbyn".
Clearly a majority of MPs and the local representatives of the Labour Party, are understandably disenchanted with Corbyn's leadership.
But she said: "I won't be crossing the floor any time soon, I can guarantee you that".
The Labour party today suspended the Wallasey Constituency Labour Party (CLP) while it investigates the allegations. Others can secure a vote by paying £25 to become a registered supporter before 5pm on Wednesday.
Lawyers for the Labour leader successfully argued he had a right to be heard in the case because his interests were not the same as those of Labour's general secretary, Iain McNicol, who had previously been the only named defendant in the case brought by a Labour donor.
"We do need a new generation of Labour men and women to take this party forward and get us ready for government once more".
She has been repeatedly criticised for signing up to become a Labour member on the day she was appointed by Mr Corbyn to head the independent inquiry.