Bannon is to be interviewed by a BBC journalist and answer questions at News Xchange, a media conference in Edinburgh on November 14-15.
Steve Bannon was one of Donald Trump's most trusted aides until August 2017.
However, she said that giving Mr Bannon a platform risked "legitimising or normalising far-right, racist views".
Sturgeon claimed she didn't want to appear at a conference that would allow Bannon to express his opinion freely, claiming that by doing so, she would be part of a process "legitimizing or normalizing far-right, racist views".
ASSOCIATED PRESS Nicola Sturgeon has pulled out of the News Xchange journalism conference after Steve Bannon's appearance was announced.
She later added: "The email the BBC sent to my office justifying Bannon's inclusion described him as a "powerful and influential figure. promoting an anti-elite movement".
A BBC spokeswoman added: "Good journalism in a world of fake news and disinformation is more vital than ever".
The EBU also released a statement justifying Bannon's presence as a "key influencer" in the current mass media.
"He has been invited to speak at News Xchange this year because his views are relevant to today's society at large and therefore to the media industry". Journalism is about asking tough questions and understanding what is happening in the world and why.
"We also consider it our journalistic responsibility to share and scrutinize a range of relevant viewpoints within the framework of a balanced debate", a spokesperson added. "Journalism is about asking tough questions and understanding what is happening in the world and why", the statement said, adding "A conference created to analyze the big issues impacting that world isn't an endorsement of anyone or anything - it is a function of what journalism is".
Green MSP Patrick Harvie commented: "Steve Bannon has been centrally involved in the attempt to re-boot the far right, both in the USA and in Europe".
"When the rise of fascism threatens so many people across the world, there must be a clear line drawn between democratic politics and extremism and the BBC must recognise that line".