The Lions have confirmed the suspension amid reports of player complaints about his coaching methods and management skills.
Lions president Kevin de Klerk told rugby365.com that the allegations were too serious to ignore, and Mitchell has been stood down pending a further inquiry.
Assistants Carlos Spencer and Johan Ackermann are to take over coaching duties in the interim.
Mitchell coached the All Blacks for two years before being replaced by Graham Henry in 2004, and was in charge when New Zealand were beaten 22-10 by Australia in the 2003 Rugby World Cup semi-finals.
He coached Waikato in the national provincial championship before taking up the head coach role for Western Force for their debut Super Rugby season in 2006.
Mitchell left the embattled Perth-based franchise in 2010, also amid reports of a player revolt, to take up a position with the Lions, guiding them to a domestic Currie Cup win last year.
The Lions have struggled in Super Rugby this year, lying bottom of the South African conference and above only the underwhelming Blues on the overall table.