Brazilian defender Paulao was sent off three minutes before half-time for a second yellow card in his side's 4-0 derby defeat at Sevilla on Saturday, and television cameras captured a section of the visiting support making racist gestures and chants towards the player.
Blatter took to Twitter on Tuesday to voice his concern at the unsavoury scenes which took place at Estadio Ramon Sanchez Pizjuan.
"Sickened to learn of 'fans' racially abusing a Real Betis player. I condemn their actions, which were seen on TV/online by millions," he tweeted.
"I will say again: It's a nonsense to fight racism with fines. This has to be tackled by ALL competition organisers."
Real Betis retweeted Blatter's comments and offered their own stance on the issue, tweeting that they condemned "any violent or racist act whether directed at one's own player or a rival".
They later called on FIFA to do more to resolve the issue of racism in football.
"To eradicate these behaviours, the role of organisations such as FIFA is also important," they tweeted.
Following the match Paulao is quoted as telling Spanish media: "My family, in Brazil as well as here in Spain, are sad and worried.
"When I left the pitch I was only upset about the sending off and I did not notice, although my friends told me about it later.
"It's good that this gets a lot of publicity so that action can be taken. We are all the same. Skin colour changes nothing."
Real Betis face Lyon in the UEFA Europa League on Thursday.
