Bob Stewart has surrendered the Conservative whip while he considers an appeal over his conviction for a racially aggravated public order offence, a government source told the PA news agency.
The Beckenham MP was found guilty on Friday of racially abusing an activist by telling him to "go back to Bahrain".
Labour and the Liberal Democrats had called for him to lose the whip.
Stewart will now sit in the House of Commons an independent MP.
He informed the Tory Chief Whip Simon Hart that he wished to surrender the whip until any appeal against his conviction was resolved, the source said.
Westminster Magistrates' Court heard how the 74-year-old MP had been attending an event hosted by the Bahraini Embassy in central London on 14 December, when Sayed Ahmed Alwadaei, the director of advocacy at the Bahrain Institute for Rights and Democracy, shouted: "Bob Stewart, for how much did you sell yourself to the Bahraini regime?"
Stewart, who was stationed in Bahrain in 1969 when he was an Army officer. replied: "Go away, I hate you. You make a lot of fuss. Go back to Bahrain."
The MP, who was fined £600, had told the court he was "not a racist" and that it had been "extremely offensive" for the demonstrator to suggest he was "corrupt".
The government has been contacted for comment by the BBC. Mr Stewart's office has also been contacted for comment.