Monsignor Thomas Derzack, 70, from Saint Nicholas Parish in Walnutport has also been barred from "diocesan events" and from school property.
Officials say he was not dressed in his clerical attire when taking the photographs during a wrestling tournament at Bethlehem Catholic High School on December 27.
Bishop Alfred Schlert removed him as a precautionary measure while the Diocese investigates.
Monsignor Derzack's actions violate diocesan standards for acceptable behavior, he said.
Officials say an officer did approach Monsignor Derzack who agreed to delete the photographs and left the event.
Bethlehem police continue to investigate, and the Diocese is cooperating with their investigation.