The move follows a pledge made last year to focus investments in the energy sector to companies which are having the greatest impact on reducing carbon emissions.
The decision followed a campaign by the University's Fossil Free Society which praised the move as 'one of the clearest and most wide-ranging in Britain'.
Fossil fuels are non-renewable energy resources, including oil and coal, which release carbon dioxide when they burn, adding to the greenhouse effect and increasing global warming.
As part of this new policy, the University employed a new fund manager whose goal was to reduce the carbon emissions profile of the endowment assets invested in the energy sector.
The fund manager is Rathbone Greenbank Investments, which provides specialised ethical and sustainable investment services for investors who wish to ensure that their investments take account of their environmental, social and ethical concerns.
Overall the Greenbank team manages £1.1 billion of funds (as at 31 December 2017) for individuals, charities, other not-for-profit organisations, trusts, and pension funds and is part of Rathbone Investment Management Ltd.
Robert Kerse, Chief Financial Officer at the University of Bristol, said: "Our aim was to end investment in companies that derive more than five per cent of their turnover from the extraction of thermal coal or oil and gas from tar sands by January 2018.
"I am very pleased that we have achieved this aim which supports the University’s strong commitment to sustainability and fighting climate change."
The University has also been actively managing the wider impact of the Endowment Fund investments on climate change. Embedded carbon in fossil fuel reserves associated with the Endowment Fund investments have decreased by 78 per cent over the last nine months from 280,742 to 62,289 tonnes of greenhouse gases.
The carbon footprint of investments in the energy sector has also reduced from 557 to 413 tonnes of greenhouse gases per £1million invested.
The University's divestment follows two momentous events in the history of fossil fuel divestment: on 12 December, World Bank Group President Jim Yong Kim announced that the World Bank would cease financing upstream oil and gas after 2019; and, in the same week, New York City pledged to fully divest $5 billion from its pension fund.
Robin Boardman, from the University's Fossil Free Society, said: "It's really exciting to see that our University has followed through its commitments to cut ties and stop supporting some of the worst climate offenders.
"This large carbon reduction is a great step in the right direction and we look forward to continuing such positive communications with the University to further reduce the remaining 60,000 tonnes of greenhouse gases still owned by the University’s investments in fossil fuel companies.
"Following New York City, the World Bank and other universities' examples, we will be working with the university to achieve a completely fossil free portfolio as soon as possible."
The University's strategy, launched in 2016, outlined its commitment to sustainability and addressing social and environmental challenges.
A key ambition is to be become carbon neutral by 2030, setting an example for the higher education sector.