Members of the Bundesbank board criticised Thilo Sarrazin for his inflammatory remarks about Jews and Muslims and voted unanimously to fire him.
The decision is expected to go ahead but must be approved by Christian Wulff, Germany’s federal president.
Mr Sarrazin, a former Berlin finance minister and the author of a new book about the German future, said that Jewish genes “differentiate them from others.”
These remarks, and others about German Muslims, prompted accusations of racism and antisemitism.
Chancellor Angela Merkel and Germany’s foreign minister Guido Westerwelle condemned Mr Sarrazin's views. Stephan Kramer, head of the Central Council for Jews in Germany, said they put the banker firmly in the neo-Nazi camp.
The Social Democratic Party, which Mr Sarrazin represents, has also begun proceedings to have his membership removed.