US driver Kyle Larson has been indefinitely suspended from the NASCAR stock car series after using a racial slur during a live-streamed virtual race on Sunday.

"NASCAR has made diversity and inclusion a priority and will not tolerate the type of language used by Kyle Larson during Sunday's iRacing event," NASCAR said in a statement on Monday.

"Our Member Conduct Guidelines are clear in this regard, and we will enforce these guidelines to maintain an inclusive environment for our entire industry and fan base."

NASCAR's action followed Larson's suspension without pay by his Chip Ganassi Racing team, and sponsors Credit One Bank and McDonald's were quick to distance themselves from the driver.

"Credit One Bank denounces the highly offensive language used by Kyle Larson during Sunday's iRacing event," the financial institution said in a statement posted on its Twitter account.

"In addition to the quick actions taken by NASCAR and Chip Ganassi Racing, Credit One Bank is terminating its sponsorship of Kyle Larson."

McDonald's USA said in a statement: "The comments made by Kyle Larson are insensitive, offensive and not reflective of our inclusive values and will not be tolerated. McDonald's is taking immediate action to terminate the relationship with Larson."

Larson himself has benefitted from NASCAR's attempts to increase diversity in its ranks.

His mother is Japanese-American and he rose from short-track racing into NASCAR's upper echelon through its "Drive for Diversity" program.

Driver Kyle Larson has been suspended by NASCAR and his Chip Ganassi Racing team after using a racial slur during a live-streamed virtual race
Driver Kyle Larson has been suspended by NASCAR and his Chip Ganassi Racing team after using a racial slur during a live-streamed virtual race GETTY IMAGES NORTH AMERICA / Matt SULLIVAN

The 27-year-old posted a video on social media platforms on Monday morning apologizing.

"I just want to say I'm sorry," he said. "Last night I made a mistake and said the word that should never, ever be said. There's no excuse for that."

Larson offered apologies to his family, his coworkers and the African-American community.

"I understand the damage is probably irreparable," he said. "I own up to it."

The Chip Ganassi Racing team said in a statement it was "extremely disappointed" with Larson's choice of an "offensive and unacceptable" slur.

Larson was taking part in the Monza Madness iRacing exhibition race late on Sunday.

The virtual races are a chance for fans to connect with drivers as sports are shut down amid the coronavirus pandemic.

A video from another competitor's Twitch stream picked up the slur on the audio channel that allows competitors to hear each other.

In the video, Larson, appearing to think he is not connected to the stream, said: "You can't hear me? Hey (racial slur)."

Xfinity driver Anthony Alfredo then said: "Kyle, you're talking to everyone, bud."

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