International Development Cooperation and Foreign Trade Minister Benjamin Dousa told AFP on Tuesday that the decision to suspend cooperation was made last week, ahead of Georgia's disputed parliamentary election on Saturday.
"The development in Georgia is very troubling," Dousa said in a written statement.
"The Georgian government's attempts to impede the country's civil society from fulfilling its democratic role through, among other things, restrictive legislation must have consequences," the minister said.
"Sweden has therefore taken the decision to suspend the direct Swedish-Georgian governmental cooperation that is still ongoing."
At the same time, Sweden was increasing its aid to Georgian civil society organisations by 25 million kronor ($2.3 million), according to Dousa.
Pro-Western opposition parties in Georgia have refused to recognise the results of Saturday's vote, which they claim was falsified in favour of the ruling Georgian Dream party.
Tens of thousands joined a protest rally in Tbilisi on Monday.
According to near-complete results announced by the electoral commission, the ruling Georgian Dream party won 53.9 percent, compared with 37.7 percent for an opposition coalition.
Dousa said Sweden was ready to resume cooperation with Georgia "as soon as" it returned to the path of moving closer to the EU.
In particular Georgia needed to abolish its law on foreign influence, "which requires civil society organisations to register as foreign agents," Dousa said, adding that Georgia also needed to improve civil rights for Georgians, "including LGBTI people".
Georgia was rocked in May by huge demonstrations against the law that critics said mirrored Russian legislation used to silence Kremlin critics.
"It is clear that Georgian society wants more Europe and Sweden wants to be a long-term partner. This year, Ukraine and Moldova have advanced their respective EU-accession processes. Our door is open when Georgia is ready to do the same, but it is up to Georgia to seize the opportunity," Dousa said.
Georgian Dream, in power since 2012, has for months been accused by the opposition of steering Tbilisi away from its goal of joining the EU and back into Russia's orbit.
Swedish aid to Georgia amounts to 190 million kronor a year, according to the government.
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