The surprise move now leaves the show's future in doubt, and bookies have slashed the odds of an early cancellation.
Carphone Warehouse has supported Big Brother and Celebrity Big Brother with extensive sponsorship over the years.
"We are totally against all forms of racism and bullying, and this behaviour is entirely at odds with the brand values of Carphone Warehouse," said Charles Dunstone, chief executive of Carphone Warehouse.
"We had already made it clear to Channel 4 that, were this to continue, we would have to consider our position.
"Nothing we saw last night [Wednesday 17 January] gave us any comfort. Accordingly we have instructed Channel 4 to remove our sponsorship name and branding with immediate effect."
TV company Endemol, which created Big Brother, declined to comment but said that it may issue a statement "at a later date".
Friends and family of Danielle Lloyd issued a statement today on the row. "We maintain that Danielle is not in any way racist and we do not believe that any comments she has made within the Big Brother house are demeaning in a racially motivated manner," said the statement.
"'F*** off home' is a term frequently used sometimes as an insult and sometimes in a jovial fashion between young people today."
In a separate move internet gambling site Gottabet.com has offered £10,000 to anyone who manages to hit one of the three contestants accused of bullying in the face with a custard pie on the night they are evicted from the house.
Gottabet.com is also offering £2,500 for anyone who can pie them in the first week that they emerge.
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