A statement released on Thursday by Greg Burke, director of the Holy See press office, explained that the Holy See "cannot be cooperating with a practice that is clearly harming the health of people."
The Vatican cited World Health Organization statistics which suggest that smoking causes more than seven million deaths worldwide every year.
Burke acknowledged that the sale of cigarettes has been a source of revenue for the Holy See.
Although Pope John Paul II banned smoking in the Vatican in 2002, cigarettes have been sold to Vatican employees and pensioners at reduced prices; they've been allowed to buy five cartons of cigarettes a month.
Taxes in Italy have caused cigarette costs to spike and it's been reported that many citizens ask their non-smoking friends in the Vatican to purchase discounted cigarettes for them.
A 2015 book by Emiliano Fittipaldi claimed that the Vatican made an annual profit of $11.6 million from cigarette sales.
However, Burke said: "No profit can be legitimate if it puts lives at risk."
He added that the sale of large cigars will continue for the time being at the Vatican because cigar smoke is not inhaled.
