Lee Steele was released by Oxford City after tweeting a remark on former Welsh rugby captain Gareth Thomas, who is currently appearing on Celebrity Big Brother.
Thomas announced his homosexuality in 2009 and Steele tweeted while watching the show that he “wouldn’t fancy the bed next to Gareth Thomas #padlock my a**e”.
Oxford City manager Mike Ford said the club was left with no other option but to dismiss the striker.
“On this occasion Lee’s had to pay for his error of judgement,” he said.
A club statement read: “The Oxford City board have decided to release Lee Steele in view of his recent comment via social media which is considered seriously contrary to the ethos of the club.”
Steele, now 38, had a long career in the Football League playing for the likes of Shrewsbury, Brighton, Oxford United and Leyton Orient.
Former England rugby union international Ben Cohen has set up a foundation to combat homophobia and bullying and told the BBC this week: “If you are a sportsman you’re a role model and people look up to you no matter what division you’re in.”
Steele has declined to make any comment.