Labour leader Sir Keir Starmer has sacked Rebecca Long-Bailey, saying she shared an article containing an anti-Semitic conspiracy theory.
Mrs Long-Bailey retweeted an interview with actor and Labour supporter Maxine Peake.
The shadow education secretary - who was beaten to the party leadership by Sir Keir - later said she had not meant to endorse all aspects of the article.
But Sir Keir said his "first priority" was tackling anti-Semitism.
The Labour leader said: "The sharing of that article was wrong… because the article contained anti-Semitic conspiracy theories and I have therefore stood Rebecca Long-Bailey down from the shadow cabinet.
"I've made it my first priority to tackle anti-Semitism and rebuilding trust with the Jewish community is a number one priority for me."
A spokesman for the Labour leader added: "Anti-Semitism takes many different forms and it is important that we all are vigilant against it."
In the article, Ms Peake discussed the police killing of George Floyd in Minneapolis.
She said: "The tactics used by the police in America, kneeling on George Floyd's neck, that was learnt from seminars with Israeli secret services."
The Independent article also quoted the Israeli police denying Ms Peake's claim saying: "There is no tactic or protocol that calls to put pressure on the neck or airway."
Later on Thursday, Ms Peake tweeted that she had been "inaccurate in my assumption of American police training and its sources".
She added: "I find racism and anti-Semitism abhorrent and I in no way wished, nor intended, to add fodder to any views of the contrary."
https://t.co/XyTPHR40Qd I retweeted an interview that my constituent and stalwart Labour Party supporter Maxine Peake gave to the Independent. Its main thrust was anger with the Conservative Government’s handling of the current emergency and a call for Labour Party unity.— Rebecca Long-Bailey (@RLong_Bailey) June 25, 2020
There are political consequences to Keir Starmer's sacking of Rebecca Long-Bailey.
On becoming leader, Sir Keir said he wanted to bring unity to the party where previously there have been factional fighting.
His decision may re-open divisions, with one former shadow minister on the party's left telling me that this was "a dangerous moment for the party" - with the new leader 'purging' those with whom he disagreed.
Others in the party note that Sir Keir has done quite a lot in a short space of time to install people close to him in key positions.
Leadership sources, though, insist the sacking was not part of some grand plan.
They say Mrs Long-Bailey had to go because she repeatedly refused to remove her retweet of Maxine Peake's article when asked to do so.
And for Sir Keir, this is all about tackling the toxic perception of anti-Semitism in the Labour party ahead of a potentially damning report from the Equality and Human Rights Commission.
His allies say he promised actions not words to the Jewish community and he is following through.
He wants to make sure that under his leadership he sends out a signal that those who are accused of anti-Semitism have no place at his top table.
The new shadow education secretary won't be announced today.
Those formerly close to Jeremy Corbyn say that the appointee must come from the left of the party if Labour's leader is concerned about maintaining unity.
But he is proving that he won't duck difficult decisions.
The Jewish Labour Movement - which has led calls for a crackdown on anti-Semitism in Labour's ranks - welcomed Sir Keir's decision to sack Mrs Long-Bailey.
National chairman Mike Katz said: "We have consistently maintained that the pervasive culture of anti-Semitism, bullying and intimidation can only be tackled by strong and decisive leadership.
"The culture of any organisation is determined by the values and behaviours of those who lead them."
And the Board of Deputies of British Jews President Marie Van der Zyl called Mrs Long-Bailey's initial response "pathetic" and thanked the Labour leader for his "swift action".
But Mrs Long-Bailey's allies on the left of the party have criticised the decision.
Former shadow chancellor John McDonnell, who supported her leadership bid, said: "Throughout discussion of anti-Semitism it's always been said criticism of practices of Israeli state is not anti-Semitic.
"I don't believe therefore that this article is or Rebecca Long-Bailey should've been sacked. I stand in solidarity with her."
Unite general secretary Len McCluskey, whose union supported Mrs Long-Bailey in her leadership bid, said her sacking was "an unnecessary overreaction to a confected row".
"Unity is too important to be risked like this," he said.
The row erupted when Mrs Long-Bailey tweeted "Maxine Peake is an absolute diamond" with a link to the article on the Independent website.
The Salford and Eccles MP said she had retweeted the article because of Ms Peake's "significant achievements and because the thrust of her argument is to stay in the Labour Party" but she did not endorse "all aspects of it".
After she was sacked, Mrs Long-Bailey said she had issued a clarification of her retweet of the article "agreed in advance by the Labour Party Leader's Office".
She added that she was "subsequently instructed to take both this agreed clarification and my original retweet of Maxine Peake's interview down".
"I could not do this in good conscience without the issuing of a press statement of clarification.
"I had asked to discuss these matters with Keir before agreeing what further action to take, but sadly he had already made his decision."
Mrs Long-Bailey became a Labour MP in 2015. She was a supporter of former leader Jeremy Corbyn and was quickly promoted to his frontbench team, serving as shadow chief secretary of the Treasury and later shadow business secretary.
Following Labour's defeat in the 2019 election, Mrs Long-Bailey entered the leadership contest to replace Mr Corbyn and was supported by many on the left of the party.
She came second in the contest securing 26.6% of the vote, while Sir Keir won 56.2%.