The announcement came hours after Ball State University, Schnatter's alma mater, said it would not remove Schnatter's name from a campus building, The Indianapolis Star reported.
Schnatter's comments about race relations, including alleged racial slurs were made public in a report July 11 by Forbes.com, the Journal & Courier reported.
The center's name will be changed back to the Purdue University Research Center in Economics, the Star reported.
Purdue President Mitch Daniels said Purdue had received $1 million of the $8 million pledged by the Schnatter Family Foundation, the Journal & Courier reported.
David Hummels, dean of the Krannert School of Management, said the center was prepared to adjust.
"Our intention was to use the gift money to support faculty hiring," Hummels told the Journal & Courier. "We believe we can still be successful in attracting support for that purpose because the center has done, and will continue to do, excellent work. But it might be on a longer timescale than we originally planned."