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Gibson was set to star in Netflix's highly anticipated Chicken Run sequel but has been fired after Winona Ryder accused him of levelling anti-Semitic remarks at her during a 1995 Hollywood soiree.
Ryder claims Mel Gibson once referred to her as an "oven dodger" during an uncomfortable conversation at a party in 1995.
She also recalled Gibson asking her friend, who is gay, if he was "gonna get AIDS" while talking to him.
Ryder recalled the moment with Gibson as part of a wide-ranging interview published in Britain's Sunday Times.
The 48-year-old actress shared of her run-in with the star: "We were at a crowded party with one of my good friends, and Mel Gibson was smoking a cigar, and we were all talking and he said to my friend, who's gay, 'Oh wait, am I gonna get AIDS?' And then something came up about Jews, and he said, 'You're not an oven dodger, are you?'"
The incident was first reported in an interview in GQ in 2010, the same year tapes of Gibson's profanity-laced, derogatory tirades were made public.
At the time, Ryder said she knew of Gibson's dark side long before many others did because of the party incident.
"He was really drunk," Ryder said of the "horrible" joke.
"It was just this weird, weird moment."
Gibson, who grew up in Sydney, has suffered irreparable damage to his career over the years, with some of the industry's top players refusing to work with him.
In 2006, the actor was arrested for drink driving and was caught on tape making anti-Semitic remarks to the arresting officer.
In the years afterwards, controversy followed Gibson, including a headline-making interview during which he slammed a reporter who asked him about the 2006 incident, and a fiery recorded rant against his ex Oksana Grigorieva in 2010.