Thirty-one-year-old Gillis was dropped after a footage surfaced from a 2018 podcast in which he mocked Chinese people and described his remarks as "nice racism". In another episode from the same month, the comic was heard using homophobic slurs to describe Hollywood producer Judd Apatow and comedian Chris Gethard.
"After talking with Shane Gillis, we have decided that he will not be joining SNL," said an SNL spokesman.
"We were not aware of his prior remarks that have surfaced over the past few days. The language he used is offensive, hurtful and unacceptable.
"We are sorry that we did not see these clips earlier, and that our vetting process was not up to our standard."
Gillis wrote on Twitter that he respected the show's decision. "Of course I wanted an opportunity to prove myself at SNL, but I understand it would be too much of a distraction."