While tweeting about Tuesday's U.S. presidential debate, Mitchell posted a message with a term that is derogatory towards Chinese people.
He later apologized for using the word, saying he didn't know it was offensive.
The 27-year-old from Virginia Beach, Va., was due to return from injury for Friday's game against Edmonton after missing the last three weeks.
But the team says Mitchell will now not suit up against the Eskimos.
"This decision is a response to Khalif's inappropriate comments made on his Twitter feed this morning and despite his public expression of remorse, we believe this is the best course of action for our organization at this time," Lions CEO Dennis Skulsky said in a statement. "Let me state very clearly on behalf of our entire organization that Khalif's message was completely inappropriate and we apologize to anyone who was offended by it.
"The B.C. Lions, our players, coaches and staff hold ourselves to the highest standard and we are proud to represent our culturally diverse community."
The league said Mitchell broke the guidelines of its social media policy, which states that players publishing online postings "that may bring the CFL into disrepute, including posts that condone harassment, discrimination or violence" are subject to discipline from the league commissioner.
Mitchell's comments also caught the attention of B.C. Premier Christy Clark, who is a fan of the Lions.
"It was stupid. You know, we live in a province where we are trying to do everything we can to be inclusive. And we are one of the most multicultural places on earth. I am incredibly proud of that, that's part of what makes us British Columbians," Clark said. "I think a comment like that is just dumb. It doesn't reflect any of us, and I can tell you as a longtime B.C. Lions fan, it doesn't reflect the B.C. Lions organization, which is a great organization."
It's not the first time Mitchell has gotten himself into trouble. Earlier he served a two-game suspension for hyperextending the elbow of Edmonton Eskimos offensive lineman Simeon Rottier.
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