According to an anti-racist site called 'Not racist but…', Lennart Karlsson, a municipal councillor from the southern town of Habo, wrote virulently Islamophobic comments under a pseudonym on various websites.
"I'm going to go to a mosque myself with a fully-loaded vest," he is alleged to have written under the pseudonym UNObserver.
Karlsson has admitted that the pseudonym was his, but claimed his account was hacked.
Swedish public radio SR reported that a regional Sweden Democrats meeting had late on Wednesday accepted Karlsson's decision to "take a time out" from politics, and his case was transferred to the party's national offices.
Speaking to the Jönköpings-Posten daily on Tuesday, Karlsson said he believed there were different human races with different genetic predispositions to kindness and intelligence.
Under the pseudonym, Karlsson also allegedly wrote that while serving in a UN mission, he had helped lock "vandalizing Muslims" inside a church that they had apparently set alight and let them burn.