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The NCAA ruled after it determined Wiseman received impermissible benefits.
Wiseman, who is not being paid to play college basketball for Memphis, must donate $11,500 to a charity of his choosing – the same amount of benefits the NCAA ruled he received – as part of his punishment to regain eligibility. He is set to return to the court Jan. 12.
The potential 2020 top NBA draft pick has already sat out three games and received nine additional games.
"Based on case precedent, the circumstances of this case and other mitigating factors, the University will immediately appeal this decision," the University of Memphis said in a statement. "We expect a more fair and equitable resolution, and we will exhaust all avenues on James' behalf."
Tigers coach Penny Hardaway wasn't happy with the punishment.
"I've stated from the beginning I didn't think it was fair," he said after Memphis' win Wednesday over Arkansas-Little Rock. "There's nothing I can do about it. Obviously, James should be on the floor. That's just how I feel."
Wiseman withdrew a lawsuit against the NCAA last week after Memphis played him in the first three games of the season. Once the suit was withdrawn he was held out until his status was resolved.
The NCAA ruled the 7-foot-1 star was "likely ineligible" due to the $11,500 Hardaway gave his family for moving expenses from Nashville to Memphis in the summer of 2017. The NCAA said the payment wasn't allowed because of Hardaway's status as a booster for the school.
"Boosters cannot provide financial assistance to prospective student-athletes, their family members or friends unless that assistance is generally available to other members of the student body and is not given based on athletics ability," the NCAA said.
The Associated Press contributed to this report.