Kyle Larson was dropped by his team Chip Ganassi Racing on Tuesday, after the NASCAR driver used a racial slur during a livestream broadcast of an iRacing esports event.

"After much consideration, Chip Ganassi Racing has determined that it will end its relationship with driver Kyle Larson," the team said in a statement. "As we said before, the comments that Kyle made were both offensive and unacceptable especially given the values of our organization.

"As we continued to evaluate the situation with all the relevant parties, it became obvious that this was the only appropriate course of action to take."

Chip Ganassi Racing had said on Monday it was immediately suspending Larson without pay over the incident, which occurred during Sunday's virtual race.

NASCAR also suspended the driver indefinitely and ordered him to attend sensitivity training.

Larson could be heard using the slur while he was apparently testing his microphone for the competition.

Larson, a six-time winner on the NASCAR Cup Series, issued an apology saying there was "no excuse" for his actions, but it was not enough to save his job.

Pressure mounted on Chip Ganassi Racing to take further action as the team's main sponsors McDonald's and Credit One Bank on Monday terminated their relationships with the 27-year-old driver.