A commuter took a picture of the A4 piece of paper attached to a window on the number 90 bus on Monday, and sent it to transport operator Dresdner Verkehrsbetriebe (DVB) on Twitter.
Passenger Peter Dörffel, 23, who flagged up the sign which appeared to be anti-foreigner, said he wasn't surprised by the incident.
Dresden, a city in the eastern German state of Saxony, has long been viewed as a region in Germany with huge problems when it comes to xenophobic attitudes.
The Saxon capital is a bastion of the far-right and is the birthplace of the anti-Islam Pegida movement.
In November, the city declared it was facing a ‘Nazi emergency', amid rising violence and far-right sentiment.
“It frightened me, most of all because it doesn't really surprise me anymore,” Dörffel told the news site Tag24.
“This kind of thing seems to be slowly becoming normal.”
DVB said the driver would no longer be allowed to operate the company's services.
“Such behaviour is absolutely unacceptable,” a DVB spokesman said. “We immediately contacted the appropriate subcontractor. Now the incident must be investigated.”
A spokesman from the subcontractor Satra Eberhardt GmbH said the situation was “shocking”.
The company is eager to attract drivers form outside of Germany to fill vacancies.
“We are open to the world,” he said.
Users reacted angrily to the picture of the sign on Twitter, and #busfahrer (bus driver) was trending in Germany on Tuesday.
“What the hell is that,” asked one user. “Mondays in Dresden: Bus driver discredits his colleagues,” wrote another.
— ❄️ Hero in Winter ?️ (@Barldarian) December 16, 2019
Dresden's public transport authorities also reacted to the tweet online. “Hello, the news has already reached us. We're also wondering what's wrong with our colleague.”
Hallo, die Nachricht hat uns schon erreicht. Wir fragen uns auch, was mit dem Kollegen nicht stimmt. 🙁 Heute ist dieser nicht mehr unterwegs und dies Verhalten wird auch Konsequenzen haben. /cl
— DVB AG (@DVBAG) December 16, 2019
In the tweet, DVB said the behaviour “would have consequences”.
It's not the only anti-foreigner story to grab headlines recently. Last week a landlord was fined after advertising a flat only 'to Germans'.