"It is time to lift the sanctions," Gahr Støre announced in a statement.
"Recent developments in Myanmar demonstrate that the authorities are serious about reforms and that should be welcomed. What Myanmar needs now is contact with the rest of the world, economic development and international aid," he said.
"At the same time it is a message to those who oppose the reforms that the sanctions can be reinstated, the reality is that we are now suspending them," he stressed.
A weapons embargo remains in place, he added.
Burma, which is also known as Myanmar, has surprised observers with a series of reforms in the past year after the end of nearly half a century of military rule, and historic by-elections on April 1st have been widely praised.
The elections gave democracy activist Aung San Suu Kyi her first seat in parliament after she spent 15 of the past 22 years locked up by the junta.
Suu Kyi, who was awarded the 1991 Nobel Peace Prize by the Norwegian Nobel Committee but who has never been able to travel to Oslo to pick it up, called for a suspension of the sanctions on her country for the first time on Friday.
"This would strengthen the hands of the reformers -- not just the suspension but the fact that there is always a possibility of sanctions coming back again if the reforms are not allowed to proceed smoothly," she said.
"We still have a long way to go but we believe that we can get there. I believe that (Burma President) Thein Sein is genuine about democratic reforms."
Gahr Støre said he had informed Suu Kyi of Norway's decision by telephone on Sunday.
Burma's military seized power in 1962, ushering in almost half a century of repressive junta rule and isolation from the West.