The Laura Ingalls Wilder Award will now be known as the Children's Literature Legacy Award, the Association for Library Service to Children announced.
The ALSC said the decision was made in consideration of "expressions of stereotypical attitudes" in Wilder's work that are "inconsistent with ALSC's core values of inclusiveness, integrity and respect, and responsiveness."
"While we are committed to preserving access to Wilder's work for readers, we must also consider if her legacy today does justice to this particular award for lifetime achievement, given by an organisation committed to all children."
Wilder won the first award in 1954. Other winners are E.B. White, the author of "Charlotte's Web" and Theodor Seuss Geisel, author of the Dr Seuss books.
Critics have highlighted anti-native and anti-black sentiments in Wilder's work for decades, although her books are still published, read and loved by many.
In 1952, a reader complained to publishers Harper's about the author's characterisation of the West as a place where "there were no people. Only Indians lived there," The Washington Post reported.
Harper's in 1953 decided to change "people" to "settlers" but other criticisms focused on her depictions of Native Americans and some African Americans.
Wilder was born in 1867 in Wisconsin, becoming a school teacher and moving to Missouri with her husband in 1894, dying at the age of 90 in 1957.
Her first book, The Little House in the Big Woods was published in 1932 when she was 65. It told the story of five-year-old Laura and her pioneer family in Wisconsin.
It was followed by Little House on the Prairie in 1935, On the Banks of Plum Creek in 1937 and By the Shores of Silver Lake in 1939.
The books inspired the hugely popular 1974-1983 television series Little House on the Prairie starring Melissa Gilbert.
The ALSC is part of the American Library Association, founded in 1876.