Oxford City have sacked their striker Lee Steele for posting a homophobic remark on Twitter about the former Wales rugby player Gareth Thomas.

Mike Ford, manager of the Southern Football League Premier Division club, said the decision was taken in response to Steele tweeting about Thomas's appearance in Celebrity Big Brother. Steele wrote: "I wouldn't fancy the bed next to Gareth Thomas #padlockmyarse".

Ford told the BBC: "On this occasion Lee's had to pay for his error of judgment. He's made a homophobic comment, [but] that doesn't necessarily mean he's homophobic."

A club statement said: "The Oxford City board have decided to release Lee Steele in view of his recent comment via social media which is considered seriously contrary to the ethos of the club."

Steele, 38, had a long career in the Football League playing for clubs including Shrewsbury, Oxford United and Leyton Orient, and was part of the Brighton squad that won the old Division Two in 2001-02.

Thomas first spoke publicly about his sexuality in 2009, saying: "I've been through all sorts of emotions with this – tears, anger and absolute despair. I wasn't sure if I ever wanted to let people know and, to be honest, I feel anxious about people's reactions and the effect it might have on my family.

"It's been really tough for me, hiding who I really am and I don't want it to be like that for the next young person who wants to play rugby or some frightened young kid."

Reacting to the sacking, the Justin Campaign against homophobia in football said: "While it is never pleasing to see someone lose a position in a club or company, we fully applaud the club's decision to terminate the player's contract.

"For far too long homophobic comments like the ones Steele made have been defended using the erroneous argument that such remarks as simply harmless 'banter'. However, we no longer accept racist 'banter', and likewise, we must never accept homophobic 'banter'.

"Oxford City's brave decision shows us that things are, slowly, moving in the right direction and that football is starting to take homophobia, biphobia and transphobia seriously."