Kelvin MacKenzie "will not return" to The Sun after a column in which he compared Everton midfielder Ross Barkley to a gorilla provoked outcry.
Parent company News UK announced its decision to part company with the tabloid's one-time editor, whose column from April 14 led to a printed apology.
A News UK spokeswoman said: "Further to our statement on 15 April that Kelvin MacKenzie's services as a columnist for The Sun were suspended, we can confirm that Mr MacKenzie's column will not return to The Sun and his contract with News Group Newspapers has been terminated by mutual consent."
The opinion piece featured a photograph of a gorilla's eyes below a close-up of Barkley, whose grandfather was born in Nigeria.
A storm of criticism followed, which saw Everton bar The Sun's reporters from its stadium and Liverpool mayor Joe Anderson reporting MacKenzie to the police for "racial slurs."
MacKenzie told Press Association he would "refuse to allow" the controversy to tarnish his decades working with the newspaper, adding there were "plenty of opportunities out there."
MacKenzie said: "I refuse to allow this latest controversy to cast a shadow over the decades of great times I have had with The Sun.
"There are plenty of opportunities out there and I agree with Winston Churchill who said: 'Success consists of going from failure to failure without loss of enthusiasm.'"
The article came on the eve of the 28th anniversary of the Hillsborough disaster in which 96 Liverpool fans died.
MacKenzie's departure from the newspaper follows a career chequered with controversy.
He was editor of The Sun when it published a front-page article headlined 'Hillsborough: The Truth' in the aftermath of the 1989 disaster at Sheffield Wednesday's stadium.
The article claimed Liverpool fans were to blame for the tragedy. MacKenzie apologised in 2012, but many shops in the city still refuse to stock the title.