The former foreign secretary, who is stepping down as an MP to take on a new role with a US charity, said he has resigned as vice-chairman and non-executive director of the club due to the Italian's "past political statements".
Di Canio, 44, has been accused of fascist views after appearing to give a straight-arm salute to fans while playing for Italian club Lazio.
, Mr Miliband said: "I wish Sunderland AFC all success in the future. It is a great institution that does a huge amount for the North East and I wish the team very well over the next vital seven games.
"However, in the light of the new manager's past political statements, I think it right to step down."
Di Canio has joined Sunderland on a two-and-a-half year deal after Martin O'Neill was sacked yesterday by the struggling Premier League side.
The former West Ham striker has admitted in the past to having fascist leanings, telling Italian news agency ANSA in 2005: "I am a fascist, not a racist."
He has also courted controversy most recently following his acrimonious departure as manager of League One club Swindon in February.
Despite concerns Sunderland chairman Ellis Short said he believed Di Canio is the man to steer the Black Cats away from the relegation zone.
Paolo is hugely enthused by the challenge that lies ahead of him. He is passionate, driven and raring to get started. The sole focus of everyone for the next seven games will be to ensure we gain enough points to maintain our top-flight status. I think that the chances of that are greatly increased with Paolo joining us.
Mr Miliband joined the Sunderland board in February 2011 having retired from frontline politics after losing the Labour leadership race to his brother Ed.
Di Canio is no stranger to controversy as a player or manager.
In 1998, while playing for Sheffield Wednesday, he pushed referee Paul Alcock to the ground after being sent off in a clash with Arsenal at Hillsborough.
Di Canio received an 11-match ban from the Football Association, including a statutory three matches for being sent off in the previous month's game against Arsenal. He was also fined £10,000.
The Italian was then pictured in 2005 making a raised-arm salute to a group of supporters of Lazio, where he was playing.
He was given a one-match ban and fined £7,000 for the incident, and was also banned for a match following a similar incident earlier in 2005.
In 2011, when Di Canio was appointed as Swindon Town's manager, the GMB union withdrew its sponsorship of the club, citing his political views.
However, he received widespread praise while playing for West Ham when picked up the ball during a match with Everton after the opposition's goalkeeper lay injured.
Di Canio was awarded FIFA's Fair Play Award in 2001 in recognition of his "special act of good sportsmanship".