Adam Rytenskild has tendered his resignation and will step down immediately, Tabcorp said on Thursday.
The wagering giant said the board became aware of "inappropriate and offensive language used by Mr Rytenskild in the workplace," and considered it to be inconsistent with his continued leadership.
"I don't recall making the alleged comment and it's not language I would usually use, but I have regrettably agreed to resign," Mr Rytenskild was quoted as saying in Tabcorp's announcement.
The company did not say what the language was and said it would not be making any further comment in relation to the conduct to protect the privacy of those involved.
Mr Rytenskild will only receive the termination payments required by law and his contract and will forfeit all unvested short and long-term incentive awards, Tabcorp said.
Tabcorp chairman Bruce Akhurst will take on additional duties as executive chairman with immediate effect while the company searches for a new chief executive and managing director.
"The board regrets that Mr Rytenskild's employment has ended this way and acknowledges his commitment to Tabcorp's growth over more than two decades, including the last two years as MD and CEO, and his contribution to the transformation of the company," Mr Akhurst said.
Mr Rytenskild said Tabcorp had been an enormous part of his life for many years and he believed in the journey the company was on.
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