Manager Remi Garde took the decision following reports that the 20-year-old visited a Manchester nightclub after the 4-0 defeat at Everton on Saturday.Villa, who are bottom of the Premier League, play Watford on Saturday.
"You have to behave as a professional and it was not the case this time for Jack," said Garde.
"He will not play with us, which is already a big punishment for a player. Now we will see the next step."Garde refused to say how long Grealish would be with the under-21s, adding: "Jack knows, but it is staying private with him and with me."
Grealish was warned about his off-field behaviour in April by then Villa boss Tim Sherwood after he was photographed apparently taking nitrous oxide.
In June, Villa said they would speak to the player after photographs were published appearing to show him lying in the street while on holiday in Tenerife.
Grealish, a product of Villa's academy, made his first-team debut in the penultimate game of the 2013-14 season.
He helped the club narrowly avoid relegation last season as well as reaching the FA Cup final.
Grealish recently opted to play for England, despite having represented Republic of Ireland Under-21s.
After the defeat at Goodison Park, Grealish chose to stay in the north-west rather than return to the Midlands with the Villa squad.
"Sometimes, players in every country ask to stay in the city where we are playing," said Garde.
"It is not a problem for me; it can happen once or twice during a season. The problem for me was not him not being on the bus.
"Jack has got a lot of ability but he needs to improve his game and work at it."
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