YouTube’s announcement comes days after Disney cut ties with the 27-year-old Swede for the same reason, spurring allegations that YouTube’s actions were for business- and publicity-related reasons.
PewDiePie, whose real name is Felix Kjellberg, started his YouTube channel in April 2010. Since then, he has attracted more than 53 million subscribers and registered 14.5 billion views.
For a long time, Kjellberg’s channel was ranked #1 in subscriber count. However, it now stands at #4. It is estimated that he earns about US$15 million annually from YouTube.
A PewDiePie video gets a minimum of five million hits.
Following Disney's move, YouTube also removed the channel from its premium advertising service and cancelled the release of an upcoming series.
"We've decided to cancel the release of 'Scare PewDiePie' season 2 and we're removing the PewDiePie channel from Google Preferred," a YouTube spokesperson said.
Kjellberg is best known for his wacky video game content; last year he was named among Time magazine's 100 most influential people.
"Although Felix has created a following by being provocative and irreverent, he clearly went too far in this case, and the resulting videos are inappropriate," a Maker Studios spokeswoman told The Wall Street Journal.
In a recent stunt, Kjellberg paid two people in India to hold up a sign that read "Death to all Jews".
The payment was made using Fiverr — a freelance service website that describes itself as "the place for people to share things they're willing to do for US$5".
Kjellberg responded by saying the videos were a joke and that he did not think "they would actually do it".
He also defended his content in a Tumblr post over the weekend, saying he did not endorse hate-based groups.
"I think of the content that I create as entertainment, and not a place for any serious political commentary," he said.
"I know my audience understands that, and that is why they come to my channel. Though this was not my intention, I understand that these jokes were ultimately offensive.”
Fellow YouTubers weighed in, with video blogger and filmmaker Casey Neistat posting a video expressing his thoughts on "the biggest content creator on YouTube" to his 6.4 million subscribers.
"In my very best judgement, I don't think this guy has a hateful bone in his body. I don't think he's interested in preaching hate, I don't think he's an anti-Semite and I don't think his intent was to spread hate," he said.
Neistat, who knows Kjellberg personally, is a self-described defender of free speech "in any capacity", but said Kjellberg's jokes were not to his taste.
"I think what this does underscore for YouTubers is that, just like everyone else in the world, you can say whatever you want but at times there will be consequences."