It will instead attempt to block the groups from being viewed by users in countries where Holocaust denial is illegal.
That is no consolation for Sydneysider Alex Gollan, who started the Facebook group Australians Against Racism & Discrimination and has since been inundated with abuse and even death threats. He says there is a hotbed of racism on Facebook and the company has virtually refused to do anything about it.
Gollan, 25, recently filed a complaint with police against two Facebook users who allegedly threatened his girlfriend, contacted his friends and family and spread his personal details around the internet.
The social networking site says it will remove groups that are sponsored by recognised terrorist organisations or that "express hatred towards individuals", but it will not take down groups that "speak out against countries, political entities or ideas".
However, months after Facebook said it would remove groups with racist content - including "F--- Islam", "I Hate Israel", "You're in Australia ... SPEAK ENGLISH!!!", "Aussie Pride!!! Love it or GET THE FUCK OUT" and "I cannot tolerate SOUTH AFRICAN ACCENT" - all of those groups, and many more, are still open and continue to spread their message.
"I've received death threats by email and phone, my girlfriend's received threats of violence, we've had threats of blackmail," Gollan said.
The latest controversy relates to the Holocaust denial groups on the site including "Holocaust: A series of lies", "Holocaust is a Holohoax" and "Holocaust is a myth". A US attorney had complained that the groups violated the site's terms of service and would leave Facebook legally liable in countries where Holocaust denial is a crime, such as in Germany and Israel.
The groups are still accessible in Australia, where there are no specific laws prohibiting Holocaust denial. However, our courts have made it clear that the practice is a form of racial vilification.
Gollan said there were limits to "free speech" and likened the Holocaust denial groups to similar groups that deny the existence of the stolen generations.
On one of the groups, a poster writes: "Jews are snakes and and they are liars, they are the biggest disease this planet has ever endured."
Facebook and its 800 employees, which serve more than 200 million users around the world, do not appear to be succeeding in their stated ambitions to remove racist groups. Similarly, they have failed to block get-rich-quick scammers from advertising on the site, contrary to promises.
Anti-racism campaigners believe Facebook will not act to remove controversial content from the site unless it is pressured by the media or police.
However, last week the site removed a group titled "Isle of Man KKK" following complaints from a high school that some students were members. Facebook also appears to have removed some of the groups that sparked complaints last year, including "Asian drivers should be forced to display A-Plates".
Facebook said in a statement that it had to "strike a very delicate balance" between giving Facebook users the freedom to express their opinions and ensuring people do not feel threatened when using the site.
The social networking site said it had blocked the Holocaust denial groups in some parts of Europe but refused to delete the groups altogether.
"For example, homosexual content is illegal in some countries, but that does not mean it should be removed from Facebook," it said.
NSW Jewish Board of Deputies chief executive Vic Alhadeff said there was a world of difference between free speech and hate speech and all publishers had a responsibility to ensure they did not give a voice to racial hatred.
"Facebook is being used and abused as a platform for racism. This material should be dealt with immediately," he said.
Late last year, the Race Discrimination Commissioner, Tom Calma, said there was insufficient monitoring of cyber-racism and the law did not provide adequate protection for victims.
The Australian Communications and Media Authority has said that Australia's attorneys-general were considering whether the National Classification Scheme should be amended to include specific measures aimed at combating racial material which is published online.