A Rashtrapati Bhavan communique said Rajkhowa "shall cease to hold the office of the Governor of Arunachal Pradesh".
President Pranab Mukherjee has asked Meghalaya Governor V Shanmuganathan to discharge the functions in addition to his own duties, until regular arrangements are made, it said.
Rajkhowa, who was appointed the Governor of Arunachal Pradesh on May 12, 2015, was the first gubernatorial appointee of the Modi government and has also been sacked by it after informing the President that it has "lost trust" in him.
Union Home Minister Rajnath Singh had called on the President last week and conveyed to him that Rajkhowa's continuance in the post has become untenable after the Supreme Court's observations against him over dismissal of the Congress government in the state.
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The Home Minister's meeting with the President came after Rajkhowa refused to step down despite a nudge by the Centre to put in his papers after the Supreme Court passed serious strictures against him over the dismissal of the Congress government last year.
A defiant Rajkhowa had said he would not step down but was ready to be sacked. "I want the President to dismiss me. I will not resign. Let the President express his displeasure. Let the government use provisions of Article 156 of the Constitution," the Governor had told a Guwahati-based TV news channel on Monday.
Rajkhowa said he had been asked to resign "on health grounds" weeks after the Supreme Court had restored the Congress government in Arunachal Pradesh and censured him. Rajkhowa had also written to the President explaining his position and the letter was forwarded to the Home Ministry by Mukherjee.
However, when the Home Ministry submitted a detailed report on the Governor to the President, he finally sacked Rajkhowa today. Rajkhowa, a 1968 batch IAS officer, had retired as Chief Secretary of Assam before being appointed as Governor.