The decision was greeted with howls of protest from environmental groups who accused the city authorities of bulldozing their heritage.
Although experts from the Culture Ministry advised that the wall be left where it was pending further digging, the government has ordered it to be dismantled.
The pounds 28m building nicknamed "God's garage" will hold 90 tourist coaches and several hundred cars. Visitors will leave the car park on escalators that will take them through a shopping mall before depositing them in St Peter's Square.It should be ready for Easter.
Franco Bassanini, the Cabinet Under-Secretary said the solution would "protect the remains and allow full use of the car park which is fundamental to avoid inconvenience and traffic congestion for pilgrims and Romans".
The environmental group Italia Nostra, described the decision as "shameful".
Work came to a standstill in August after the discovery of several frescoed rooms. It was initially thought to be the domus of Agrippina, the mother of Caligula, but further examination showed it to be a villa from the 2nd century AD. The frescoes have been removed to prevent damage from rain and excavation is continuing.
Archaeologists said that in building the car park construction companies destroyed precious tombs of Christian martyrs, dating to Nero's time. Heritage experts were not given access to the excavation and the Vatican is not bound by Italy's strict laws on preserving archaeological remains.
Magistrates have opened an inquiry after the discovery on a rubbish tip outside the capital fragments of mosaics, vases and marble columns, said to come from the site.
The Vatican said: "No archaeological remains were found during the construction of the car-park."