The company made its announcement after Lochte lied about being robbed at gunpoint by a policeman after a night out during the Rio Olympics.
Speedo said: "We cannot condone behaviour that is counter to the values this brand has long stood for."
Lochte and three team-mates had in fact damaged a petrol station toilet door.
They had been returning to the Olympic village after a night out in Rio when they tried, unsuccessfully, to use the locked toilet and urinated outside instead.
Speedo said it would donate a $50,000 portion of Lochte's sponsorship fee to the charity Save The Children's Brazilian operation.
Lochte is one of the most successful swimmers in history, with 12 Olympic medals, and he once had his own reality television show in the US.
In Rio, he swam in two events, winning a gold medal in the 4x200m freestyle relay along with team-mate Jack Conger.
Lochte's behaviour has been met with disdain in the US and he has been widely pilloried in the US media.
On 19 August the New York Post carried a front-page headline describing him as the "Ugly American", along with the slogan "Liar, Liar, Speedo on fire".
After first claiming that he and his three team-mates had been robbed by bogus policemen, Lochte back-tracked and admitted he had, while still drunk, "left details out" and "overexaggerated some parts of the story".
Despite the evidence against him, including CCTV footage, he has however also denied that he actually lied in his initial account to Brazilian police.
"We appreciate his many achievements and hope he moves forward and learns from this experience," Speedo said of Lochte.