The League One club, founder members of the Premier League, have fallen on hard times and have been under threat of having to move from their Ricoh Arena home because of rent arrears.
At a High Court hearing on Tuesday it was heard that the club owed £60 million to creditors.
"The Football League can confirm that Coventry City Football Club have been deducted 10 points, in accordance with its rules and regulations," a statement said.
"This sporting sanction has been implemented with immediate effect. Coventry City have seven days in which to appeal.
"The League has now begun discussions with the administrator aimed at achieving a sustainable future for the club within The Football League," the statement added.
Coventry, who memorably won the 1987 FA Cup final by beating Tottenham Hotspur 3-2 after extra time at Wembley, moved out of Highfield Road, their home since 1899, and into the all-seater 32,500 capacity Ricoh Arena in 2005.
They were relegated from the Premier League in 2001 after 34 years in the top flight and slipped into the third tier of English football last season.
Promotion back to the Championship had been a possibility this season but the 10-point deduction leaves them in 14th place and with little chance of going up.
Coventry's plight is a stark illustration of the dangers of falling outside the lucrative Premier League.
Portsmouth, another club to win the FA Cup recently, are also in administration and fighting for their existence with relegation to the fourth tier looming.
Fans have formed the Pompey Supporters' Trust in a bid to take over the south coast club.
- Sports & Recreation
- Coventry City Football Club
- Premier League