Stuart MacLennan (pictured), who was hoping to stand in the Moray constituency, reportedly branded the elderly "coffin dodgers" and posted a series of foul-mouthed rants about politicians, including Tory leader David Cameron and Liberal Democrat leader Nick Clegg.
Mr MacLennan was summoned to Labour's Scottish headquarters in Glasgow today, where he was sacked.
Party bosses originally believed the comments were made some time ago, but when it became apparent that some were made more recently, they acted.
The announcement of his sacking came less than an hour after Labour's leader in Scotland, Iain Gray, said he still had the backing of the party.
A Scottish Labour spokesman said Mr MacLennan had been axed as the candidate for Moray for "the totally unacceptable language which he has expressed online".
He added: "On reading the comments in full, the Scottish Labour Party was outraged by their content and Scottish Labour's General Secretary took the decision to suspend his membership of the Labour Party.
"Stuart MacLennan is no longer a Labour Party candidate nor eligible to hold office as a Labour Party representative."
Prime Minister Gordon Brown said: "A candidate has made a mistake. It's unacceptable. That candidate has got to resign.
"I have made it absolutely clear what my views are: we cannot have people standing as candidates for the Labour Party who express these views, so that candidate will not be a candidate for the Labour."
Speaking to ITV News later, Mr Brown added: "It's wrong. He shouldn't have said those things...
"When I first saw the comments, I said 'This man has got to go'.
"I'm afraid he has made a mistake and I can't have that. I can't have him representing the Labour Party as a candidate.
"I think people will know we have got to be tough on these things."
Scottish Tory leader Annabel Goldie said: "To describe, as Mr Murphy and Labour tried to do, foul-mouthed rants against elderly people, women, ethnic minorities and others as 'foolish' is appalling.
"It was repugnant, insulting and totally in character with Labour's desperate and dirty campaign.
"What staggers me is senior Labour figures, including Ed Balls, Andy Burnham, Ben Bradshaw and John Prescott, condoned this behaviour for so long by following his Tweets without protest.
"Labour clearly didn't care about this type of smearing and dirty politics until it was exposed."
SNP leader and Scotland First Minister Alex Salmond said Labour had descended into "a total shambles".
He said: "Obviously it is the right thing that somebody who insulted all of Scotland's old age pensioners can't stand as a candidate.
"The problem the Labour Party now has is it is now emerging many leading Labour figures, senior politicians, Cabinet members, Shadow Cabinet members of Scotland, were followers on his Twitter.
"So they knew the sort of things he was saying. They knew this candidate was insulting the pensioners, insulting the north of Scotland, demeaning Scotland's greatest national product, but did nothing about it.
"The Labour Party have moved on from being an issue affecting one candidate to now a question of who knew what, when.
"They stand accused not just of total incompetence and disarray, but of complete and utter hypocrisy."
He added: "The interesting thing is, it is now emerging the followers on his Twitter were Ed Balls, Wendy Alexander.
"Leading Labour Party figures knew about what he was saying and presumably thought it was all right so long as nobody knew about it."
Liberal Democrat Scottish spokesman Alistair Carmichael said: "The Labour Party has been forced to sack a candidate who was clearly young and inexperienced.
"This whole debacle only demonstrates the weakness of Labour in Scotland."
The decision leaves members of the local party in Moray searching for a new candidate.
A Scottish Labour Party spokesman said activists in the area would meet "in the next day or so" to do this.
He added: "We expect a new candidate to be in place in the next couple of days."