The 37-year-old world champion, who is running in May elections for a seat in the Philippines' Senate, told a local broadcaster that gay people were "worse than animals."
"It's just common sense. Do you see any animals of the same sex mating?" Pacquiao, who already has a House of Representatives seat, said.
He subsequently posted an apology to YouTube, saying that he was sorry for hurt he had caused, but also reiterated his opposition to same-sex marriage, which is not permitted in the staunchly Roman Catholic country.
Nike, the world's largest apparel maker, cut ties with the boxer-turned-politician immediately.
"We find Manny Pacquiao's comments abhorrent," the company said in a statement.
Pacquiao had been with Nike for eight years, wearing shorts in the ring with the Nike swoosh.
Pacquiao's promoter-manager Bob Aram told CNBC that Nike did the right thing.
"Why would they want to offend the gay and lesbian community. They sell product to everyone," Aram said.
The legendary promoter said that while he did not agree with Pacquiao's comments, he understoo where they came from. He explained that Pacquiao was a recent convert to evangelical Christianity.
"In the Philippines where he is running for senate, most of the people are against same-sex marriage," Aram said.
The list of athletes that Nike has cut ties with is small, but in recent years has grown.
The company most recently severed its relationships with running backs Ray Rice and Adrian Peterson, sprinter Oscar Pistorious and cyclist Lance Armstrong.
"Nike and other brands today recognize that they aren't just talking to the LGBT [lesbian, gay, bisexual and transgender] community but millenials and the next generation," said Bob Witeck, CEO of Witteck Communications, which consults on LGBT issues.
Witeck said Nike's actions could set a new standard under which athletes were judged.
"Nike is a brand trailblazer and I expect others to follow their actions," he added.
Pacquiao is scheduled to fight Tim Bradley on Apr. 9 as part of the World Welterweight Championship on pay-per-view.
Aram says several sponsors who were ready to finalize their deals for the upcoming fight had since informed him they were no longer interested in being associated with the Philippino boxer.
However, he doesn't the furore will have any impact on the number of people who tune in for what is likely to be Pacquio's last fight.
"What he said is offensive to a lot of people and that is very unfortunate," Aram said. "On the other hand, that's his religious belief. He has the right to articulate it. If it hurts him, so be it."