According to the league, Payton ignored instructions from the NFL and Saints ownership to make sure bounties weren't being paid. The league also chastised him for choosing to "falsely deny that the program existed," and for attempting to "encourage the false denials by instructing assistants to 'make sure our ducks are in a row.' "
Goodell also banned Saints general manager Mickey Loomis for the first eight games next season, and assistant coach Joe Vitt for the first six games.
In addition, Goodell fined the Saints $500,000 and took away their second-round draft picks this year and next.
After the NFL first made its investigation public on March 2, Williams admitted to - and apologized for - running the program while in charge of the Saints' defense from 2009-11. He was hired by the Rams in January. Goodell will review Williams' status after the upcoming season and decide whether he can return to the league.
The Saints now must decide who will coach the team while Payton is barred. His suspension is effective April 1.
After the NFL made clear that punishments were looming, Payton and Loomis took the blame for violations that they acknowledged "happened under our watch" and said Saints owner Tom Benson "had nothing to do" with the bounty pool, which reached as much as $50,000 in 2009, the season the Saints won the Super Bowl.
Saints quarterback Drew Brees reacted quickly to the news on Twitter, writing: "I am speechless. Sean Payton is a great man, coach, and mentor . . . I need to hear an explanation for this punishment."
The NFL said the scheme involved 22 to 27 defensive players; targeted opponents included quarterbacks Aaron Rodgers, Cam Newton, Brett Favre and Kurt Warner. "Knockouts" were worth $1,500 and "cart-offs" $1,000, with payments doubled or tripled for the playoffs.
According to the league, Saints defensive captain Jonathan Vilma offered $10,000 to any player who knocked then-Vikings QB Favre out of the 2010 NFC Championship Game.
All payouts for specific performances in a game, including interceptions or causing fumbles, are against NFL rules. The NFL warns teams against such practices before each season, although in the aftermath of the revelations about the Saints, current and former players from various teams talked about that sort of thing happening frequently - although not on the same scale as the NFL found in New Orleans.
In a memo sent out to the NFL's 32 teams, Goodell ordered owners to make sure their clubs are not offering bounties now. Each club's principal owner and head coach must certify in writing by March 30 that no pay-for-performance system exists.
Punishment for any Saints players involved will be determined later, because the league is still reviewing the case with the NFL Players Association.
As recently as this year, Payton said he was entirely unaware of the bounties - "a claim contradicted by others," the league said. And according to the investigation, Payton received an email before the Saints' first game in 2011 that read, "PS Greg Williams put me down for $5000 on Rogers (sic)." When Payton was shown that email by NFL investigators, he acknowledged it referred to a bounty on Rodgers, whose Packers beat the Saints in Week 1.
The league said that in addition to contributing money to the bounty fund, Williams oversaw record-keeping, determined payout amounts and who got cash, and handed out envelopes with money to players. The NFL said Williams acknowledged he intentionally misled NFL investigators when first questioned in 2010, and didn't try to stop the bounties. Vitt was aware of the bounties and, according to the league, later admitted he had "fabricated the truth" when interviewed in 2010.