The ruling – which follows a similar move by the American rights owner Hasbro – affects competition-level Scrabble, which is played by thousands of people at international tournaments.
Mattel's decision has also prompted three prominent members of the World English-Language Scrabble Players Association (Wespa) to resign in protest, arguing that playing a word was not insulting in itself.
Darryl Francis, a British author who has helped compile official Scrabble word lists for more than 40 years, said he quit because Mattel's decision had been forced on players.
"Words listed in dictionaries and Scrabble lists are not slurs," he said. "They only become slurs when used with a derogatory purpose or intent, or used with a particular tone and in a particular context.
"Words in our familiar Scrabble word lists should not be removed because of a PR purpose disguised as promoting some kind of social betterment."
Mattel told The Times that its intervention, which is the first time it has sought to remove words, was a political decision in response to the Black Lives Matter protests in 2020.
Ray Adler, the global head of games, said: "We looked at some of the social unrest that's going on globally. We looked at everything we were doing as a company and opportunities to be more culturally relevant. I've heard the argument that these are just words, but we believe they have meaning.
"Can you imagine any other game where you can score points and win by using a racial epithet? It's long overdue."
Mattel has been approached for comment.