"Major League Baseball is committed to building a culture of diversity and inclusion throughout the game," Manfred said in a statement. He said the logo "is no longer appropriate for on-field use."
The decision is unlikely to silence complaints from Native American organizations and others who see the symbol as offensive.
The Indians will continue to wear the Wahoo logo in 2018, and even after it is taken off the uniform, the club will still sell merchandise featuring the mascot in the Cleveland area.
"I'm elated," Philip Yenyo, executive director of the American Indian Movement of Ohio, said of the decision to stop using Wahoo on the uniforms. "But at the same time, I think it should be this year. I don't understand why they're drawing this out. It doesn't make any sense to me, unless they want to continue to make what's basically blood money."
He added: "Just make the leap already."
Yenyo and others have demanded that the team go further and drop "Indians" from its name: "If they don't get rid of the name, then you're still going to have fans going down there wearing headdresses and painted in redface."
The club has been moving away from the Chief Wahoo logo in recent years. The Indians replaced it with a "C'' on some of their caps and removed signs with the Chief Wahoo logo in and around Progressive Field, the team's ballpark.
National criticism over Chief Wahoo grew in 2016, when the Indians made the World Series and Manfred expressed his desire to have the team drop the symbol. During the playoffs, a lawsuit was filed while the club was playing in Toronto to have the logo and team name banned from Canadian TV. A judge dismissed the case.
The Indians' successful bid to host the 2019 All-Star Game further heightened the debate.
"While we recognize many of our fans have a long-standing attachment to Chief Wahoo, I'm ultimately in agreement with Commissioner Manfred's desire to remove the logo from our uniforms in 2019," Dolan said in announcing the decision.
The team will continue to sell Chief Wahoo gear because if it stops doing so, it will lose ownership of the trademark and others will be able to use the symbol as they please.
Reaction to the announcement was swift on social media as fans took sides on a touchy topic that has become part of the Cleveland sports landscape for generations.
Every year, Native American groups have protested outside the stadium before the home opener in hopes of getting the Indians not only to abolish Chief Wahoo but to change the team name.
Many fans are dedicated to preserving Chief Wahoo and see the logo as a symbol of the city's comeback in the mid-1990s, when the Indians opened their new ballpark and the team made the playoffs for the first time since 1954.
The NFL's Washington Redskins have come under similar fire to change their Indian-head logo and name, but so far they have resisted. Last year, a U.S. Supreme Court ruling in another case made it clear that the Redskins name cannot be stripped of trademark protection just because some find it offensive.