Paulao appeared to have monkey chants aimed at him by sections of the travelling Betis support after being sent-off with Sevilla leading 1-0 just before half-time.
Sevilla went on to win the match 4-0.
"Sickened to learn of 'fans' racially abusing a Real Betis player. I condemn their actions, which were seen on TV/online by millions," Blatter said on his official Twitter account.
"FIFA's members approved a resolution at Congress in May to tackle discrimination. It's time for tougher sanctions.
"I will say again: It's a nonsense to fight racism with fines. This has to be tackled by all competition organizers."
Paulao didn't comment on the alleged chants after the match, but rather spoke to the media to ask for forgiveness on the part of the fans and his teammates for being sent-off at such a crucial point in the game.
However, Betis also publicly condemned the incidents via their Twitter account saying they "condemn any violent or racist act directed towards one of their own players as much as an opponent."
The incident is not the first example of racism during a Liga match this season.
Last month two Elche fans were fined €4,000 ($5,400, £3,340) and banned from attending sporting events for a period of 12 months for racially abused Granada defender Allan-Romeo Nyom.