“It shattered on impact.”
Transport minister Marc Garneau cited new satellite data as the reason for the decision.
European airspace bans have forced the airline to cancel some flights there, but the troubled plane still remains in use in Canada.
The company says it has been working on an update to the system implicated in a deadly 2018 crash.
Three airlines in Canada are running the Boeing plane, which has crashed twice in five months, killing 346 people in total.
“Here we have a brand-new aircraft that's gone down twice in a year. That rings alarm bells in the aviation industry."
The decision follows Sunday's Ethiopian Airlines crash that killed everybody on board.
The plane burst into flames after it clipped a fence on its final approach.
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