Jenny Tonge has been asked by Liberal Democrat leader Charles Kennedy to quit his front bench following her remarks about Palestinian suicide bombers.
Dr Tonge is stepping down as an MP at the next election
The Lib Dem MP has insisted she did not condone suicide bombers despite saying she would consider becoming one if she were Palestinian.
Now Mr Kennedy has asked her to step down as children's spokeswoman.
He said: "Her recent remarks about suicide bombers are completely unacceptable."
He continued: "They are not compatible with Liberal Democrat party policies and principles.
"There can be no justification, under any circumstances for taking innocent lives through terrorism."
He added he was sorry to lose Dr Tonge from his frontbench team.
Mr Kennedy's decision was announced after a day in which Dr Tonge was repeatedly criticised.
Dr Tonge said she understood her remarks may have upset some people but insisted she was not condoning violence.
"I was just trying to say how, having seen the violence and the humiliation and the provocation that the Palestinian people live under every day and have done since their land was occupied by Israel, I could understand and was trying to understand where [suicide bombers] were coming from," Dr Tonge told BBC Radio 4's Today programme.
Israel's ambassador Zvi Shtauber told News 24 he welcomed the news of her sacking.
"I understand it's a matter of free speech, but I expect her to express some sympathy for the victims of suicide bombers and not confining herself to confessing understanding for suicide bombers," he said.
"I can tell you one thing," added Dr Shtauber, "We must stand up against such remarks, which are an incitement against the state of Israel and against Jews."
MP Louise Ellman, a member of the Labour friends of Israel group who had earlier urged Dr Tonge to apologise, welcomed Mr Kennedy's decision.
"It recognises that her statement was irresponsible and gave the green light to terrorism," said Ms Ellman.
Dr Tonge is stepping down as MP for Richmond Park in south-west London at the next election.
She was speaking to a pro-Palestinian lobby when she said of Palestinian suicide bombers: "If I had to live in that situation - and I say that advisedly - I might just consider becoming one myself."
Shadow foreign secretary Michael Ancram said the comments would "sicken
those across the world who have lost loved ones to suicide bombers".
Kenneth Collins, a former chair of the Scottish Council of Jewish Communities, said: "The comments were irresponsible and phrased in a way that people will take from them that she was in favour of terror and not peace, and I'm sure that is not what she intended."
But Labour MP Richard Burden, the chairman of the All-Party Palestine Group who was at Thursday's meeting, said Dr Tonge had expressed understanding for the horror of all victims of violence.
He said she needed to choose her words more carefully but was right to recognise the pain suffered by Palestinians.
He told BBC Radio 4's PM: "We need to understand that pain, just as we need to understand the
pain of a suicide bomber and the pain that the Israeli people have
suffered. I think that's a reasonable message."