Raheem Sterling, Danny Rose and Callum Hudson-Odoi were among the England players targeted by racist abuse by home fans during the 5-1 win in Podgorica on March 25.
Sterling celebrated the visitors' fifth goal by cupping his ears towards the crowd after a section of supporters were heard directing monkey chants towards England's black players.
The UEFA ruling means Montenegro will play their match against Kosovo on June 7 in an empty stadium.
England's Football Association welcomed UEFA's decision to sanction Montenegro and said it hopes the punishment "sends out a message that racism has no place in football or in wider society".
European football's governing body also fined the Montenegrin FA €20 000 for other charges including crowd disturbances, setting off fireworks, throwing objects and blocked stairways.
After the Montenegro incident Sterling, a victim of several instances of racist abuse this season, urged UEFA to impose stadium bans to crack down on the problem.
"It's now time for the people in charge to put a real stamp on it because you can fine someone, but what is that going to do?" he said.
"You've got to make it a bit harder, punish fans that can't come to games. Do something that's going to make them think twice. If their team can't play with fans, it's going to be difficult."
England manager Gareth Southgate was left visibly upset about the treatment of his players and called for education to help eradicate racism in the sport.
"Sanctions are worthless if there is nothing alongside that to help educate people," said Southgate.
The Montenegrin FA promised to ban any supporters found to have racially abused England's players, and said it would "undertake all necessary measures to identify the irresponsible individuals".
"In a multicultural and multi ethnical society as Montenegro is, there is not any space for such conduct," read a statement from the Balkan country's football association.
UEFA regulations state that if supporters engage in racist behaviour then "the member association or club responsible is punished with a minimum of a partial stadium closure".
Article 14 also states that additional sanctions can be imposed depending on the situation, while "disciplinary measures may be combined with specific directives aimed at tackling such conduct".