The Ukip leader suggested people in London would be right to be concerned if Romanians moved in next door.
The watchdog confirmed today that it has powers to investigate acts of prejudice and take individuals to court.
The move follows weeks of coverage on Ukip election candidates making controversial comments, which Mr Farage had previously put down to a few “idiots”.
The constant accusations of racism dogging Ukip appear to have damaged the party with a poll today showing its lead going into Thursday’s European elections has plummeted.
In response, it organised a carnival-style event in London today — complete with steel drums — in an effort to show it has candidates from diverse backgrounds.
Mr Farage was yesterday reported to the Equality and Human Rights Commission in a letter by Labour MP Keith Vaz, who chairs the Commons Home Affairs Committee.
Mr Vaz wrote: “I’m deeply concerned by Mr Farage’s comments, which are racially aggravated and offensive.