The Bharatiya Janata Party leader made the demand after accusing Katju of attacking non-Congress governments in Bihar, Gujarat and West Bengal on the basis of "his political preferences".
In an article on the BJP web site, Jaitley said Katju's attacks "seem more in the nature of thanks-giving to those who provided him with a post retirement job".
The leader of the opposition in the Rajya Sabha said Katju had over the past week released a draft report on behalf of the Press Council of India (PCI) alleging that the media in Bihar was not independent. He followed it up with an article in an English daily attacking the Gujarat government and Chief Minister Narendra Modi.
"Though initially known for his scholarship, Justice Katju was never a conventional judge. His utterances, both during his tenure as a judge and thereafter, are clearly outlandish," Jaitley said, adding "Dignified comment is alien to him."
Jaitley said judges of the Supreme Court and high courts must not be eligible for jobs in the government after retirement. "In some cases the pre-retirement judicial conduct of a judge is influenced by the desire to get a post retirement assignment," he said.
"The chairman of the Press Council discharges a statutory job. His job requires fairness, impartiality and political neutrality. Additionally, a judge, whether sitting or retired, is expected to conduct himself with sobriety, dignity and grace. He cannot be loud, crude, outlandish or behave like a megalomaniac," Jaitley said.
He said a judge should refrain from involvement in political controversies. If he desires to get into political activity or a political debate, he should cease to hold his judicial or quasi-judicial office.