The decision by the UK-based Public Relations and Communications Associations (PRCA) comes after Bell Pottinger ran a campaign which included the phrase "white monopoly capital".
It was carried out on behalf of Oakbay Capital, an investment holding company run by the controversial Gupta family -- itself accused of wielding undue political influence over the South African government.
A PRCA committee set up to investigate the matter said the UK firm's campaign "was by any reasonable standard of judgement likely to inflame racial discord in South Africa and appears to have done exactly that".
Announcing the decision to expel Bell Pottinger from the PRCA, director general Francis Ingham said the PR firm had brought the industry "into disrepute with its actions".
The decision has no financial costs for Bell Pottinger, which will be able to operate as normal going forward.
"But they will be doing so with the impact of significant reputational damage," the PRCA's Matt Cartmell told AFP.
"The potential impact on them is large because they've been publicly expelled from the PRCA as a result of their activities," he added.
South Africa's main opposition party, the Democratic Alliance (DA), previously accused Bell Pottinger of having run a "divisive campaign to divide South Africa along the lines of race" on behalf of Oakbay.
'Economic apartheid'
The DA criticised Bell Pottinger for promoting "economic apartheid" through its campaign.
On Sunday, Bell Pottinger's chief executive James Henderson resigned from his post.
"Whilst I had no involvement in the account, there were warning signs that I should have heeded. Therefore I must take responsibility," he said.
An independent report conducted by law firm Herbert Smith Freehills released on Monday found senior management at fault for failing to put in place adequate policies to minimise the risks associated with the account.
