Phil Bottomley made the controversial comments on his personal blog, leading to calls for his dismissal from the party.
Mr Bottomley wrote that 'Labour's deliberate plan of uncontrolled immigration policy was a classic case of ethnocide'.
"Put simply it is the cleansing or diminishing of an indigenous population by methods other than mass extermination," he wrote. "It is a fact that by 2070 the immigrant population will be ahead of the indigenous peoples of England, Wales, Scotland and Northern Ireland."
Leader of Walsall Council, Councillor Sean Coughlan, said the remarks were 'abhorrent and dangerous'.
UKIP said the remarks were 'foolish' and has referred the matter to its national executive committee, but called Labour's response 'exaggerated' and 'inflammatory'.
Councillor Coughlan said: "In a town that has a wonderful mix of cultures, I find these comments abhorrent.
"I am calling on Mr Farage to disown his comments and choose a new branch chairman."
UKIP spokesman, Craig Winyard said: "This was a foolish and misguided post that does not reflect UKIP's position."