Ms Atkinson's chief of staff Christine Hewitt has also been expelled, a party spokesman said.
It follows a newspaper investigation into an apparent expenses claim.
The South East MEP, who is standing in Folkestone and Hythe on 7 May, said she was "deeply disappointed" by the decision and would appeal.
In a statement, she added: "I was elected to represent the constituents of the south-east of England and I will continue to work tirelessly on their behalf and for the best interests of our country."
A UKIP spokesman said the two women had 14 days to appeal.
"Ms Atkinson no longer represents the UKIP in the European Parliament and she will no longer be a prospective parliamentary candidate for  Folkestone and Hythe," he added.
He declined to say how or when a new candidate would be chosen.
Ms Atkinson was initially suspended following the Sun's investigation, which party leader Nigel Farage said "couldn't look worse".
The newspaper published a secret recording appearing to show Ms Hewitt speaking to the manager of a restaurant in Margate, Kent, before UKIP's spring conference.
In the footage, she appears to ask for an invoice for a much higher sum than the bill she had originally received.
Ms Hewitt is heard to say: "The idea is we overcharge them slightly, because that's the way we repatriate it."
A member of the hotel staff replies: "3,150, is that alright? Yeah, if you're all right with that? Is that enough for you?"
Ms Hewitt then says: "Oh God yeah, that's more than enough."
It is not known whether Ms Atkinson knew or authorised her staff member's apparent actions.
The BBC has been unable to contact Ms Hewitt for comment.
MEP and general election candidate Janice Atkinson has been expelled by UKIP for "bringing the party into disrepute".