Mr Bloom interrupted a speech by Mr Schulz by calling out, in German, the infamous Nazi slogan, "Ein Volk, ein Reich, ein Fuhrer" – One People, One Nation, One Leader.
The heckle came as Mr Schulz was complaining about the UK’s role in reducing the size of the EU budget next year and asking: "Does the UK decide everything that happens in the EU?"
Mr Bloom’s shout prompted Mr Schulz to respond: "I don’t know if people heard that… when a man like that traipses through this chamber chanting ‚Ein Volk, ein Reich, ein Fuhrer’… there were people in Germany who said that and I fight against that spirit in everything I do, but I’m not sure he (Mr Bloom) does."
European Parliament president Jerzy Buzek, chairing the debate, looked set to carry on, but jeers rose up and the French centre-right leader in the Parliament Joseph Daul challenged Mr Bloom to apologise.
He said: "We are in a democracy, this is a democratic era and I would ask you to make an official apology. This is not acceptable – I’m almost surprised you didn’t add concentration camps to the equation."
Mr Buzek then asked Mr Bloom to apologise and the Ukip member for Yorkshire and North Lincolnshire stood up and replied: "The views expressed by Herr Schulz meet the case – he is an undemocratic fascist."
A shocked Mr Buzek retorted: "Well, we expected something quite different."
Amid a growing clamour from MEPs, Mr Buzek then asked Mr Bloom to leave the chamber.
With a shrug and a look of bemusement, Mr Bloom did so – and when he returned later to take part in a vote, the session was stopped while ushers escorted him out once again.
Afterwards Mr Bloom commented: "Schulz is an unrepentant Euro nationalist and a socialist.
"He wants one currency, one EU state, one EU people.
"Already the Euro nationalists have one currency, one flag, one anthem, a foreign service and are creating a home office for justice.
"They are creating here one Parliament with one executive and one EU citizenry.
"The EU Commission have already taken control of the economies of Ireland and Greece, no doubt others to follow."
Mr Bloom went on: "These Euro nationalists are a danger to democracy. These people are fanatics. People have got to wake up to this fact.
"My father, as a Spitfire pilot, fought for freedom against Nazi domination of Europe. As an MEP, I will fight against the destruction of democracy across Europe."
MEP Barry Madlener, from the Dutch Freedom Party, insisted that Mr Bloom’s expulsion from the chamber had been unfair because Mr Schulz had not been sanctioned when he called one of Mr Madlener’s political colleagues a fascist.
He said: "We need to make sure the rules are applied evenly to all – Schulz insulted my colleague but there is no punishment for him. I think Schulz should leave the chamber too."
The remarks triggered cries of "out, out, out!" from centre-right MEPs, until the debate continued after replacement chairman Edward McMillan-Scott declared: "Mr Bloom used terms going far beyond what we would regard as acceptable in this House.
"That is an end to the matter. We will deal with it in the Bureau (a group of senior MEPs who oversee European Parliament rules and administration)."
It is the second time that Mr Schulz has been on the receiving end of Nazi jibes in the Strasbourg chamber.
In July 2003 Italian prime minister Silvio Berlusconi caused uproar in the same chamber when he told Mr Schulz during a speech: "I know there is a man producing a film on the Nazi concentration camps.
"I shall put you forward for the role of Kapo (guard chosen from among the prisoners) – you’d be perfect."
The attack was prompted when Mr Schulz criticised the Italian government’s immigration policy.
Mr Berlusconi refused to apologise, insisting the remark was a joke, prompted by Mr Schulz’s apparent similarity to an actor playing a guard in the movie then being filmed in Italy.
Labour’s leader in the European Parliament Glenis Willmott commented: "Once again, Ukip is trying to brew up a storm to make headlines back home. Godfrey Bloom’s actions are an insult to all those who have fought against fascism."
Before the outburst, Mr Schulz had been warning that the European Union was "falling apart", splitting into three elements: "France and Germany, the rest of the eurozone, and then the non-eurozone centred around the special position of the UK, and the special position of the UK needs looking at".
The MEP went on: "(German chancellor) Merkel and (French president) Sarkozy have done a deal with Cameron. Everyone knows that and it has to be said openly.
"According to the deal, there needs to be a Treaty change for the stability pact (setting euro currency rules). Cameron says yes, OK, although the House of Commons doesn’t want it, but in return Cameron gets the (EU) budget he wants and Sarkozy and Merkel have agreed."
Mr Schulz continued: "That’s the reality of Europe. It is nothing to do with the community spirit, it’s actually tearing the EU apart."
Pointing at Ukip MEPs applauding the idea, Mr Schulz continued: "If you don’t want those people over there to call the shots in future, you have to take Europe in another direction."
Political group leaders in the European Parliament issued a joint statement condemning "insults" directed by Mr Bloom at Mr Schulz.
It stated: "We can never accept that MEPs insult their colleagues in a way that recalls the worst hours of our history.
"In this time of serious economic and social crisis affecting the whole of the European Union, solidarity and dignity are more than ever needed from the representatives of the peoples of Europe."
It was signed by Joseph Daul (European People’s Party), Guy Verhofstadt (Liberals and Democrats), Rebecca Harms and Daniel Cohn-Bendit (Green Alliance), Michal Kaminski (European Conservatives and Reformists – including UK Tories), and Lothar Bisky (European United Left).
The signatories called on the European Parliament leadership to impose a "severe sanction" on Mr Bloom.
But Ukip MEPs said they were supporting their man.
Ukip leader and MEP Nigel Farage, speaking of behalf of the party, said: "Whereas we accept that Mr Bloom’s jibe in the Parliament may have been rash and inflammatory, we fully support his sentiments about the formation of an undemocratic Europe.
"This was the week that the EU Commission has taken control of the economy of a second country, this time Ireland. The EU is clearly intent on expanding its powers. This political union is becoming a danger to national democracies and the freedoms of people in their everyday lives."
In a statement released following Mr Bloom’s outburst, Liberal Democrat MEPs’ leader Fiona Hall said: "The decision to exclude Mr Bloom from the Chamber of the European Parliament on the grounds of his unparliamentary language was the correct one.
"I applaud Edward McMillan-Scott for his handling of the episode from the chair. Mr Bloom is a national embarrassment."
Geoff Meade, PA