Di Canio had his own weekly programme on Sky Italia, a unit of Sky Plc, to discuss the English premier league, but sparked controversy on Sunday when he appeared with bare arms, with the word "Dux" inked large on his right forearm.
"Dux" refers to Italy's World War Two leader, Mussolini, who was known in Italy as Il Duce and was allied with Nazi leader Adolf Hitler.
"We committed an error and apologise to all those who were offended. After a long conversation (with Di Canio) we have decided to suspend (contacts)," said Jacques Raynaud, the vice president of Sky Italia's sport channels.
There was no immediate comment from Di Canio.
As a Lazio player in 2005, Di Canio celebrated a goal against rivals AS Roma with a straight-arm fascist-style salute to his club's fans. He later sought to distance himself from the extreme right when he faced criticism in 2013 after being appointed manager of Premier league club Sunderland.
"I am not political, I do not affiliate myself to any organisation, I am not a racist and I do not support the ideology of fascism. I respect everyone," he said at the time.
(Reporting by Crispian Balmer; Editing by Alison Williams)
