A spokesman said the decision was made in conjunction with Rescue Coordination Centres in Fiji and New Zealand after covering a wide area both from the air and the sea.
The aerial search was suspended on Friday.
The spokesman said the three remaining search boats had now returned to Tarawa.
He said despite the suspension, Rescue Coordination Centres had been asked to continue broadcasting calls to all marine vessels in Kiribati waters to be on high alert for any survivors or debris from the ferry.
Some of the seven survivors in Tarawa have already been interviewed about the accident.
The Marine Division spokesman said he was compiling an investigative report, adding that it appeared the vessel may have become grounded twice before it sank.
He confirmed reports the MV Butiroi was carrying up to 30 tonnes of coconuts – well in excess of its cargo limit – in addition to more than 80 passengers.
Documents show the vessel was not licensed to carry passengers. The investigation is ongoing and expected to take more than a week.
Some of the survivors are reported to be still too traumatised to talk.
The spokesman said once all the information had been gathered and investigators had returned from Nonouti island he would report back to the Kiribati government.
Police in Kiribati have seized the passport of the Fijian owner of the ferry. Kirennang Tokiteba, has been ordered to remain in the country while authorities investigate the disaster.
Tokiteba said he accepts responsibility as the owner of the vesssel but said he cannot understand why the captain sailed with passengers on board, which he says was against his orders as the ferry was not licensed to carry passengers on the day of its departure.
The Kiribati government is also being heavily criticised by the public for failing to report the MV Bituroi missing until a week after it was scheduled to arrive in the capital Tarawa.
A local MP from Nonouti island said the people were devastated and wanted answers.
- PNC sources