The Rev Simon Sayers has been banned from being a minister for five years by the Bishop of London after admitting to initiating and engaging in two sexual acts with the teenager 20 years ago.
He has resigned his position of Rector of Warblington with Emsworth, Hampshire.
A Metropolitan police investigation into the incidents was carried out in 2015, after allegations of indecent assault had been reported to them. The sexual acts took place in the Islington area where Mr Sayers had been in a parish ministry in 1995.
A police investigation was carried out but no action was taken against Mr Sayers.
A Diocese of Portsmouth spokesman said: "The Rev Simon Sayers has admitted two sexual incidents with a 16-year-old schoolgirl, and his part in initiating that sexual contact.
"The Bishop of London - in whose diocese the incidents happened - has found that the Rev Simon Sayers abused his position of trust by engaging in sexual acts with the girl.
"He engaged in conduct unbecoming a clergy person and inappropriate for a married man.
"The bishop's penalty reflects both the seriousness of the Rev Simon Sayers's behaviour on those occasions and of breaching the trust of a young person who had been in his pastoral care for some years."
Mr Sayers said the allegations of indecent assault had been made 20 years after what he called a “brief ‘above the waist’ incident of a sexual nature (with someone over the age of consent) and a brief kiss two days later, in March 1995.”
He said in a statement: “I always believed by behaviour in 1995 was wrong and fell below the high standards required of a Christian leader, and I am deeply sorry for the sadness the incident and its investigation has caused.”
Members of Mr Sayers’ current congregation and choir reportedly walked out of church on Sunday following the news of his resignation, and several local residents have publicly supported the vicar.
Norman Peers, a parishioner in Emsworth, told the BBC: “Yes, the Church has standards but the Church also preaches a message of grace, forgiveness and pastoral care,” claiming that “the hierarchy has turned its back on a much-loved man after years if sacrificial service”.
Additional reporting by PAReuse content