"They now constitute a security threat in our efforts to lead the country forward," he said in the capital, Suva.
The council, he said, had "betrayed its trust and its good standing in our nation".
The chiefs had refused to endorse the military commander's government and his nomination for vice-president following the country's fourth coup in 20 years last December.
Under the 1997 constitution, the council of chiefs which usually meets once a year, has the power to appoint the nation's president and vice-president.
Bainimarama toppled Laisenia Qarase, the prime minister, in a coup on December 5, claiming Qarase's largely indigenous government was corrupt and too soft on those responsible for a coup in 2000.
The military commander took over executive authority from Ratu Josefa Iloilo, the president, dissolved parliament and declared a state of emergency.
He later reinstated Iloilo as president, named himself interim prime minister, and appointed Ratu Epeli Nailatikau as interim foreign minister.
Dispute over candidate
Bainimarama overthrew the prime minister
in a December coup [Reuters]
ainimarama, who has said he would allow elections in 2010, had wanted Nailatikau to be the country's new vice-president, a crucial role given Iloilo is in his 80s and in poor health.
But the chiefs rejected the nomination because they said Nailatikau is associated with an illegal regime.
Bainimarama boycotted Thursday's council meeting before announcing the decision to suspend the council and scrap its funding. He said the chiefs had stopped being impartial.
"There are also strong indications that the council has now become a forum for serving political agendas," he said.
The chiefs have condemned the coup led by Bainimarama and he in return told them to have a picnic and drink under a mango tree and to take their grievances to Santa Claus.
Envoy snubbed

"I see little evidence that the military and interim government are prepared to release their grip on power"

Glyn Davis,
US deputy assistant secretary of state for East Asian and Pacific

Bainimarama's December coup drew international condemnation, with Australia, New Zealand, Britain and the US imposing economic, diplomatic and defence sanctions.
A senior US envoy visited Suva this week to discuss returning democracy to Fiji, but the commander refused to meet him.
Glyn Davis, the deputy assistant secretary of state for East Asian and Pacific, said he was told Bainimarama was too busy.
"It had been my intention to meet with Commodore Bainimarama but he has not agreed to meet with me. His decision is unfortunate and represents a missed opportunity," Davis, the first senior US official to visit since the coup, said on Friday.
Instead, Davis held talks with Nailatikau and Mahendra Chaudhry, the interim finance minister.
Davis said he restated a Pacific Islands Forum plan that calls for the military to return to barracks, refrain from involvement in politics and for Bainimarama to relinquish power to a civilian.
"Unfortunately, based on my meetings with government officials, I see little evidence that the military and interim government are prepared to release their grip on power," he said.