The Tories had begun action to suspend Mr Cherry before his resignation. A spokesman described the comments as "totally unacceptable" and said they "do not reflect the views of the Conservative Party".
The plans of the Durand Academy, which is based in Stockwell, south London, have sparked some opposition from people living near the proposed boarding school site. The proposal is to use St Cuthman's School, a disused boarding school in Stedham, West Sussex.
Mr Cherry, who represents the village, told the Mail on Sunday: "Ninety-seven per cent of pupils will be black or Asian. It depends what type of Asian. If they're Chinese they'll rise to the top. If they're Indian they'll rise to the top. If they're Pakistani they won't.
The Wellington and Cambridge-educated chartered accountant has lived in the area for more than 30 years, according to the Chichester District Council website.
John Cherry claimed Pakistani children would fail to "rise to the top" and some nationalities were "uncertain" what hard work is about. The Chichester councillor was responding to proposals by a South London academy to open an Eton-style boarding school in the West Sussex countryside.
He warned the children would want to "escape into the forest - it will be a sexual volcano".But after being heavily criticised for the comments, Mr Cherry resigned from the Conservative Party and apologised.
He said: "My remarks about Durand Academy, as reported in the Mail on Sunday today, were plainly wrong. They were thoughtless and extremely foolish. I unreservedly apologise and withdraw them. I very much regret the distress this must have caused."