The Lords Privileges and Conduct Committee said the peer - who was jailed in 2011 over his parliamentary expenses - should face the maximum sanction after he was found to have claimed the allowance for 11 days on which he did no parliamentary work.
The committee says he should be suspended from the House of Lords for the rest of the current Parliament and recommends the former Essex County Council leader repays the £3,300 which he had wrongly claimed.
Lord Hanningfield has said he is to give his compensation from wrongful arrest to the Helen Rollason Cancer Charity.
Earlier today the Tory peer was awarded at the High Court £3,500 for wrongful arrest.
I have just been to Lord Hanningfield's Essex home. The lights are all on; there are two cars in the drive but no one would come to the door.
Details of Lord Hanningfield's spending spree have emerged in a council report but police say there is not enough evidence to charge him.