Clarkson was suspended from the show two weeks ago after executives were told that he punched producer Oisin Tymon.
In addition to suspending him, the BBC pulled the final three episodes of the show’s current series and its commercial arm, BBC Worldwide, this week “postponed” four live shows due to take place in Norway this weekend.
Top Gear is one of BBC Two’s most successful shows and is Worldwide’s biggest international seller and money-spinner.
Clarkson is widely seen as integral to the show’s success which generated tend of millions of pounds for the corporation. The show’s profitability without Clarkson is now under question.
An investigation found that Tymon had suffered a cut and swollen lip after being punched by Clarkson who engaged in repeated bouts of swearing at him,
BBC Director General Tony Hall said the star’s actions had crossed a line and that his contract would not be renewed.
In a statement Lord hall said: “Obviously none of us wanted to find ourselves in this position. This decision should in no way detract from the extraordinary contribution that Jeremy Clarkson has made to the BBC.
“I have always personally been a great fan of his work and Top Gear. Jeremy is a huge talent. He may be leaving the BBC but I am sure he will continue to entertain, challenge and amuse audiences for many years to come.”
Hall said it would be “a big challenge” to continue Top Gear without Clarkson “and there is no point in pretending otherwise.”
He added that how this could be achieved would be considered over the coming months and that BBC Two will now “look at how we put out the last programmes in the current series.”