Banks aimed a homophobic slur at Hilton after he criticised her feud with rapper Angel Haze, calling him a "f*ggot".
The '212' rapper later defended her use of the word, explaining: "A f*ggot is not a homosexual male. A f*ggot is any male who acts like a female. There's a BIG difference."
Shears, who is openly gay, has now condemned Banks's use of the word in a new series of tweets, writing: "Oh yeah. 'F*ggot.' Totally cool. Give me a f**king break."
He added: "It all about context. And right now, I'm sorry, but context is not on your side... Donna Summer was ostracized for a decade from words she used about her gay fans. Too bad she didn't have twitter to recant them immediately."
Shears and Banks collaborated last year on the Scissor Sisters track 'Shady Love'.
Watch the video for 'Shady Love' below: