Fine Gael TD Maria Bailey has been removed as Chairperson of the Joint Oireachtas Committee on Housing.
In a statement, Taoiseach Leo Varadkar said that the Dun Laoghaire TD retains the Fine Gael party whip.
In May, Fine Gael announced that it would carry out an internal review over a civil case Ms Bailey took against a Dublin hotel for an alleged incident, where she suffered injuries to her head, back and hip.
Ms Bailey later withdrew her case from the courts.
This evening, she said that she accepts the Taoiseach's decision to remove her as Chairperson of the Oireachtas Housing Committee.
Ms Bailey said that she very much regretted taking the case but notes that the inquiry found that it was not a fraudulent case and says she made no attempt to mislead.
In his statement, Mr Varadkar said the inquiry confirmed Ms Bailey was injured from the fall in 2015, and sustained injuries.
He said that Ms Bailey signed an affidavit that over-stated the impact of her injuries on her running.
"I hope this will send a clear message to other public representatives about taking such cases in future," he said in the statement.
"The accident happened and the injuries were real and were confirmed by medical reports. The inquiry states that it was not a fraudulent claim," the Taoiseach said.
The statement said too that Minister Josepha Madigan (then a backbench TD) gave initial legal advice, guidance and assisted Deputy Bailey with her Personal Injuries Assessment Board (PIAB) application.
Mr Varadkar said that this was a preliminary step "which often results in amicable resolution but the hotel did not engage with the PIAB".
He said that Minister Madigan did not deal with the subsequent legal proceedings, but were instead dealt with by another solicitor in the firm who acted on Ms Bailey's instructions.
The statement goes on to say that Ms Bailey was advised that she had a "statable" case.
However, there were concerns that a finding of contributory negligence against her was likely and this was communicated to her on several occasions.
The inquiry, carried out by barrister David Kennedy, found that it was unlikely that a court would conclude that she deliberately sought to mislead as other legal documents talk about her running being restricted rather than not being able to run at all.
But the Taoiseach said there have been inconsistencies in Ms Bailey's account of events to him and the media that he cannot reconcile.
"It is clear to me, that Deputy Bailey made numerous errors of judgement in her handling of this matter from the outset, during and even after she'd withdrawn the case. And her approach jars with that of a Government taking action to reduce personal injury payments, claims and insurance costs to people and businesses.
"For these reasons, I am demoting her and removing her as Chairperson of the Joint Oireachtas Committee on Housing.
"I hope this will send a clear message to other public representatives about taking such cases in future.
"In not going further by removing the whip from Deputy Bailey, I do so conscious of the devastating effect this saga has had on Deputy Bailey and her family in particular. She has endured considerable negative publicity, public criticism and is now personally liable for significant legal and medical costs."
In a statement, the Dun Laoghaire TD said she regrets the difficulties this issue caused for the Taoiseach and her Fine Gael colleagues in recent elections.