The world-famous athlete, actor and former California governor fired The Real Housewives of Beverly Hills star after her "Prima" team lost the season's fifth task. Kyle was found responsible for her team's loss since she served as the project manager.
"I think the governor was expecting me to fight harder for my position, but I couldn't throw anyone under the bus because I've grown to care about all of them," Kyle said in tears following her ouster.
The episode kicked off with the season's 12 remaining celebrities still split into two teams -- men "Arete" vs women "Prima" -- and awaiting their next task.
The season's fifth task was to create a four-page photo campaign for a new Kawasaki motorcycle. The teams' campaigns would be viewed as art installations in a gallery and judged on creativity, demographic appeal and presentation.
Kyle volunteered to be project manager for "Prima" as long as her team backed her up, while television star and celebrity stylist Carson Kressley stepped up to lead the men's team.
Once in the boardroom with Arnold's nephew Patrick Schwarzenegger and quantum physicist turned wealth manager Gemma Godfrey serving as advisers, Arnold wanted to discuss each team project's strengths and weaknesses.
The Kawasaki executives thought "Arete" had creativity in their campaign and went outside the box. Carson "nailed" his presentation and showed thorough knowledge of the brand. However, the men's team maybe pushed the envelope a little too much, raising eyebrows among core enthusiasts by featuring drag queens, priests and more in their photos.
As for the women, the executives loved their showcasing and thought their bike was approachable. However, they didn't take enough risks and played it safe. In one photo of former Dancing with the Stars co-host Brooke Burke-Charvet sitting on the back of a motorcycle with her husband driving, the executives wished they had switched places to appeal to more female buyers and riders.
In the end, the men's "Areta" team won their fourth challenge overall, scoring Carson $25,000 for his True Colors fund that helps LGBT youth get off the streets and into homes.
In a surprise twist; however, Kawasaki decided to give Kyle's charity -- Children's Hospital Los Angeles -- $25,000 as well since the race was really close and her team nearly won the challenge.
It came to light that Prima probably would have won the task had Brooke and her husband switched places on the bike. The team agreed that was Brooke's job and her call, but the former host refused to believe that one picture was solely to blame for the team's failure.
Kyle opted to bring Brooke and The Real Housewives of Atlanta star Porsha Williams back into the boardroom with her since they were in charge of the campaign's creative direction and choices.
Arnold determined that a couple of Kyle's creative decisions in prior weeks were flops as well, and at one point, she probably should've been fired. Since she was project manager, the boss thought Kyle "fell short" and "didn't go all the way." Kyle was then "terminated" from the show.