The 'BBD' singer, who yesterday released a retaliatory diss track aimed at Angel Haze, reacted to Twitter criticism from Hilton by calling him a "f*ggot".
Banks and Hilton exchanged barbs after the blogger criticised Banks's feuds with other female artists. The rapper went on to call him "d**ckbreath" and tell him to "gobble a d**k. (sic)"
Hilton told Banks: "Some of your music is cute, but your attention-seeking ways are pathetic and hurtful. You drag while others choose to uplift!"
Banks responded: "Whatever bitch, you tried to sign me to ur little bum ass label in '11 with them bulls**t ass artists..." She later tweeted: "Omg u should just kill yourself... Like for real... lol what a messy f*ggot you are."
Fans of both Banks and Hilton responded angrily to the term, with one follower tweeting: "Wow low blow banks i did like you till now. *deletes songs off ipad*."
Another commented: "@AZEALIABANKS is going to ruin her career before it even started. Death wishes aren't cute. @PerezHilton #yungrepugnant."
However, Banks defended her position, saying: "A f*ggot is not a homosexual male. A f*ggot is any male who acts like a female. There's a BIG difference."
She added: "If u listen to my music and are not offended by the word nigga... We're not gonna go here with this f*ggot s**t... We're just not. Lol."
Last month, Banks said that she was planning to quit rapping as it is "tacky" and "unladylike".