Patrick Mercer, the shadow homeland security minister, has been axed from the Conservative frontbench after claiming racism is "part and parcel" of army life.
In an interview with the Times Online, the MP for Newark and former officer said he "came across a lot of ethnic minority soldiers who were idle and useless, but who used racism as cover for their misdemeanours".
Plans to establish an anti racism union were "complete and utter rot" he said, and suggested that racial abuse is akin to being bullied over facial features or weight.
Talking of his experiences serving alongside black soldiers, the Mr Mercer said: "They prospered inside my regiment, but if you'd said to them: "Have you ever been called a nigger?' they would have said: 'Yes'. But equally, a chap with red hair, for example, would also get a hard time - a far harder time than a black man, in fact.
"But that's the way it is in the Army. If someone is slow on the assault course, you'd get people shouting: 'Come on you fat bastard, come on you ginger bastard, come on you black bastard'."
The Conservatives initially dismissed Mr Mercer's comments as a "private matter". However, amid increasing criticism David Cameron this afternoon asked his homeland security minister to resign.
Mr Cameron said: "The comments made by Patrick Mercer are completely unacceptable and I regret that they were made. We should not tolerate racism in the Army or in any walk of life. Patrick Mercer is no longer a shadow minister."
Following his resignation, Mr Mercer said that he "deeply regretted" any offence caused.
He continued: "I had the privilege to command soldiers from across the east Midlands of whom many came from racial minorities. It was a matter of great pride to me that racial minorities prospered inside the unit.
"What I have said is clearly misjudged and I can only apologise if I have embarrassed in anyway those fine men whom I commanded. I have no hesitation in resigning my front-bench appointment."
Mr Mercer was removed from the shadow frontbench shortly after the Liberal Democrats described his position as untenable.
Edward Davey, Sir Menzies Campbell's chief of staff, described Mr Mercer's comments as "staggering", claiming the heart and soul of the Conservative party is "deeply unpleasant" despite Mr Cameron's attempts at re-branding.
The government's armed forces minister Adam Ingram disputed Mr Mercer's description of racism in the army.
"Racist abuse can have no place in any walk of life, and it is appalling and inappropriate for any politician, never mind a senior Tory MP like Patrick Mercer, to suggest that 'this is just the way it is in the Army'," said Mr Ingram.
Senior army officials have worked hard to make it clear that racism is not acceptable in the army, Mr Ingram continued, and the Conservatives are out of touch if they do not recognise there is no place for prejudice in the armed forces.