France Soir owner Raymond Lakah, a French Egyptian, said in a statement to AFP news agency that he "decided to remove Jacques Lefranc as managing director of the publication as a powerful sign of respect for the intimate beliefs and convictions of every individual".In the meantime, merchants in Arab countries are pulling Danish products from the shelves.
"We express our regrets to the Muslim community and all people who were shocked by the publication."
Journalists at the newspaper stood by their editor's decision on Thursday, printing a front page picture and editorial in which they strongly defended the right to free speech.
Religious freedom gives people the right to practise their faith or not, the editorial says, but should not become a means to impose the rules of a single religion on society as a whole.
French MP Herve Mariton condemned the sacking as "in total contradiction of the tradition of press freedom".
Danish-Swedish dairy product maker Arla Foods, with annual Middle East sales of 3 billion Danish crowns ($488 million), said it was talking to unions about 140 job cuts due to the boycott.
"We are losing around 10 million crowns per day at the moment," a spokeswoman said.
The world's biggest maker of insulin, Novo Nordisk, said it was also hit as pharmacies and hospitals in Saudi Arabia have avoided its products since Saturday.
Thanks to Tat and Stuart for the heads up.