The group has a Reconciliation Action Plan program which supports organisations "to develop respectful relationships and create meaningful opportunities with Aboriginal and Torres Strait Islander peoples".
A total of 1100 organisations have an active RAP but only 21 are in the Elevate group. The only other company to be thrown out of the Elevate group is Rio Tinto after the big miner destroyed the Jukaan caves in the Pilbara last year.
The Aboriginal non-profit, which says its vision is for "a just, equitable and reconciled Australia", said in a statement on Tuesday that it carried out an investigation into the matter in November last year, the time when the issue came to light.
"Our investigation concluded that Telstra has not met its own aspirations to be a leader in the reconciliation movement nor the expectations of an Elevate RAP partner.
"As a consequence of our investigation, Reconciliation Australia has revoked Telstra’s Elevate Reconciliation Action Plan."
As iTWire reported last year, the Australian Competition and Consumer Commission has taken Telstra to court over what it has described as "unconscionable conduct” in the matter.
The ACCC said at the time that Telstra had admitted its staff in five stores in the Northern Territory, South Australia and Western Australia used unfair selling tactics and took advantage of a substantially stronger bargaining position when selling post-paid mobile products on behalf of Telstra.
Reconciliation Australia said it had told Telstra that it was extremely concerned about "both the impact of the individual business practices on vulnerable Indigenous consumers and the failure to respond quickly to address the problem".
The group said: "Telstra’s actions to take responsibility for the unconscionable business practices and address the financial impact on all impacted individuals are promising first steps on a long road to rebuilding relationships and restoring trust.
"We are encouraged by the robust long-term commitments and accountability in their proposed settlement with the ACCC. They have also demonstrated a strong commitment to restoring their relationship with Reconciliation Australia and the RAP network.
"Taking this into account, we have invited Telstra to discuss the development of a new RAP that addresses the concerns raised by the ACCC investigation. This will not be an Elevate RAP."