The incident took place in a huddle during a timeout in Thursday's loss to Michigan.
"Coach Chambers and I have spoken about what occurred during the Michigan game, and he is very remorseful," athletic director Sandy Barbour said in a statement. "His actions were unacceptable, which he recognized, and he apologized to Myles Dread last night and his family today. His actions do not reflect the values of Penn State and the expectations we set for our programs and must not occur again. Pat and I agree his actions were unacceptable, and he will be suspended for Sunday night's game vs. Wisconsin."
Chambers addressed the incident immediately after Thursday's game, claiming he was only "trying to challenge" and "get the best" out of Dread. The 48-year-old followed that up with a statement through the school on Friday.
"My actions were inappropriate; that's not what Penn State stands for or what I stand for. I told Myles I was sorry that it happened," Chambers said. "Sandy and I have spoken and agreed there are some things I need to address. I've assured her this won't happen again and understand my actions last night come with consequences."
Assistant head coach Keith Urgo will act as head coach for Sunday's game against Wisconsin.
Penn State holds a record of 7-7 and is winless through three games of Big Ten Conference play.
Chambers has led the school to a 120-129 record over eight seasons at the helm.
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