Ms Sturgeon tweeted: "I believe passionately in free speech but as Scotland's First Minister I have to make balanced judgements - and I will not be part of any process that risks legitimising or normalising far right, racist views". "I regret that the BBC has put me and others in this position".
She added: "The email the BBC sent to my office justifying Bannon's inclusion described him as a 'powerful and influential figure. promoting an anti-elite movement.' This kind of language to describe views that many would describe as fascist does seem to me to run the risk of normalisation". News is a host partner.
"Good journalism in a world of fake news and disinformation is more vital than ever. Journalism is about asking tough questions and understanding what is happening in the world and why", the statement said, adding "A conference created to analyze the big issues impacting that world isn't an endorsement of anyone or anything - it is a function of what journalism is".
Critics of Bannon believe his brand of politics to be unsafe and hateful.
Steve Bannon was one of Donald Trump's most trusted aides until August 2017.
He has been a vocal supporter of Tommy Robinson.
Bannon had been invited on behalf of the European Broadcasting Union's (EBU) News Xchange committee, the BBC said in an official statement.
"He has been invited to speak at News Xchange this year because his views are relevant to today's society at large and therefore to the media industry. He will be interviewed about his views by a BBC journalist, followed by an open Q&A with delegates".
HuffPost's editor-in-chief Lydia Polgreen said she had been planning to attend, but cancelled due to a conflicting event, prior to Bannon's involvement being known.