The suspension follows widely publicised rumours that Zuma had ordered Nxasana to quit his job.
Nxasana has not been given a security clearance allegedly because he failed to disclose that he killed a man when he 18 years old. He was acquitted of that crime in 1985.
There have also been media reports about infighting in the National Prosecutions Authority (NPA) between a faction that supports Nxasana and a faction that opposes him.
Presidential spokesperson Mac Maharaj issued a statement saying Zuma had initiated action against the NDPP in terms of the NPA Act “after considering all the matters before him”.
“The details regarding the establishment of the inquiry will be communicated to the public in due course,” Maharaj said.
It is not the first time a president has instituted an inquiry over the NDPP’s fitness to hold office. Former president Thabo Mbeki did the same with then prosecutions boss Vusi Pikoli in 2007 following his decision to prosecute then police boss Jackie Selebi. The inquiry, chaired by former Parliamentary speaker Frene Ginwala, cleared Pikoli of any wrong-doing.
Nxasana was appointed in October last year after a court ordered Zuma to fill his position.