A spokeswoman for the German subsidiary told AFP that it had learned that the staff member had links on Facebook to members of the neo-Nazi National Democratic Party (NPD).
"Ikea received a tip that an employee in a managerial position in our store in Wallau (western Germany) expressed opinions and views on Facebook that are in no way compatible with our values," she added in an emailed message.
"That is why we, after an extensive review, decided to take action in the case at hand and will no longer work with the staff member in question."
Local press reports said that the employee, who was not named, had contacts on Facebook with NPD leaders in Berlin and the western Saarland region and swapped "extremist remarks" on the website.
Ikea said it took such allegations seriously.
"Cultural and religious diversity are values that form the foundation of our daily co-existence," the spokeswoman said.
"We can never accept these Ikea values not being respected in everyday working life."
Ikea's Swedish founder Ingvar Kamprad's past links to the Nazism in Sweden were thrust into the spotlight earlier this year following the publication of a new book claiming Kamprad was more active in the Swedish Nazi movement than previously thought.
Among other things, Kamprad is believed to have actively recruited new members to Sweden's main war-time Nazi movement the National Socialist Workers' Party (Svensk Socialistisk Samling - SSS).
In August, German media reports citing document from the Stasi archives claimed that Ikea used East German political prisoners in the 1970s and 1980s to help build sofas.
Germany was also rocked this month by revelations that a far-right cell was now believed to be behind the unsolved murders of at least 10 victims, most of them shopkeepers of Turkish origin, over the course of a decade.
The scandal has sparked allegations that the country may have turned a blind eye to the threat posed by right-wing extremism, despite Germany's deep-seated shame over its Nazi past.
And it has revived calls by political leaders including Chancellor Angela Merkel to examine a potential ban of the NPD, following an attempt that was struck down by Germany's constitutional court in 2003.