Liverpool fans unveiled an obscene banner of Divock Origi ahead of their clash with Genk.
Origi came through the youth ranks with the Belgian club and returns with Liverpool for their group stage match on Wednesday night.
The 24-year-old striker has been named among the Liverpool substitutes for the clash with Mohamed Salah returning to the starting line-up.
Liverpool fans were seen unfurling an obscene banner, depicting a mocked-up naked Origi with an abnormally large penis, next to the Champions League trophy.
Chants referencing the size of the manhood of black footballer's have been used for the likes of Romelu Lukaku and Aston Villa midfielder Marvelous Nakamba in the past.
Liverpool confirmed they sought to have the banner removed as soon as they became aware of it - branding it "highly offensive and inappropriate"
A Liverpool spokesperson said: "Liverpool Football Club condemns the offensive banner displayed in our section of the ground, prior to kick-off.
"To be clear, the image used perpetuated a racist stereotype. This is completely unacceptable.
"We acted swiftly to have the banner removed and we are now working with the local authorities and stadium team in Genk to identify those responsible.
"Any subsequent action will be taken in keeping with our sanctions process."
This comes amid a series of high-profile racist incidents in football in recent weeks.
Manchester United issued an indefinite ban to a supporter over racist abuse aimed at Liverpool defender Trent Alexander-Arnold during Sunday's 1-1 draw.
That came after England's players were subject to shocking abuse during their Euro 2020 qualifier with Belgium last week.
Non-league Haringey Borough also walked off the pitch during their FA Cup clash with Yeovil after their players were abused.
Speaking about racist incidents in football last season, Liverpool boss Jurgen Klopp said: "It’s disgusting, another example of something which absolutely should not happen.
“It’s still only a few people doing it, but the stronger the reaction is from all of us, the more it will help to avoid things like this in the future.
"If you do something like that, you should not be able to enter a stadium again, in my point of view, in your life."
