The move follows the deadly shooting last week at a historic black Church in Charleston, North Carolina that left nine people dead.
The accused white gunman Dylann Roof posed with the Confederate flag in photos online and allegedly wrote about inciting racial violence, before the shooting.
On Monday, South Carolina's governor declared that the Confederate flag should be removed from the statehouse grounds because its used had made it too divisive for the state to display in such a public space.
Wal-Mart and Sears in U.S. have also announced they were pulling it from their shelves.
The president of the Flag Shop Susan Braverman said the decision to remove the flag from the shelves of all of its 13 stores and its online store was easy to make.
"As long as this flag is being seen as a symbol of hate and racism — and I don't see that stopping any time soon — we're not going to be carrying it.
Braverman said they'll also stop manufacturing the flag as well.
"We don't need to be carrying this flag. This is not why we got in the flag business at all. And I have no qualms and no hesitations to be dropping it."
While the flag is still listed on the Flag Shop website, online purchases are no longer possible.
Braverman said her stores will still sell the flag in certain exceptional cases, including as a prop or to some flag collectors who are known to store owners.