Green resigned as chief executive of the Light Blues in April but returned as a consultant earlier this month.
His departure from the Glasgow giants for a second time was sealed on Tuesday, as the Rangers board prepared to meet to discuss his future at the club.
The statement read: "Following today's Board meeting, a discussion was held between CEO Craig Mather and Charles Green.
"The result of those discussions is that the consultancy agreement between Rangers and Mr Green has today been terminated by the Company with immediate effect."
A consortium led by Green purchased the business and assets of Rangers for £5.5million last summer, after the club was consigned to liquidation.
Following an outspoken spell as chief executive, Green stepped down from the role amid claims of close links with discredited former owner Craig Whyte at the time of the takeover - allegations which were denied by the Yorkshireman.
An independent inquiry commissioned by the Rangers board subsequently found no evidence that Whyte had invested in the current Ibrox set-up.
Green returned to the club three weeks ago on a £1,000-a-month retainer in order to placate some of the club's investors after Rangers' share price dropped to just 41p.
But his return proved to be just as controversial as his first spell and he quickly became embroiled in a verbal spat with Ally McCoist, after telling the Gers boss he would have a "problem" if he failed to lead the team to a domestic cup win.
McCoist responded by branding Green an "embarrassment" to Rangers.
There were also claims by former commercial director Imran Ahmad that Green was set to back him in a potential £3.4million legal bid against the Glasgow side following his own departure.
Current chief executive Mather - who faces being removed from the board himself along with Brian Stockbridge and Bryan Smart and replaced by Paul Murray and Frank Blin after a group of shareholders called for an extraordinary general meeting - told fans at a meeting earlier this month that he would call a meeting of directors where Green's position would be voted on.
However, it emerged earlier on Tuesday that Green had decided to go of his own volition, while promising Rangers investor Sandy Easdale first refusal on the 7.7 per cent stake in the club he currently owns.
In a statement, Jack Irvine - spokesman for The Easdale family - said: "Charles Green has given first refusal of his shares to Sandy Easdale as he promised.
"Sandy may take all or some of the shareholding depending on the strategic requirements of other potential investors."
Green will not be allowed to sell his shares until December under Stock Exchange rules, but has already struck a separate deal to transfer 714,285 shares to Isle-of-Man registered hedge fund Laxey Partners Limited.
Businessman James Easdale - brother of Sandy - has already been appointed to the Rangers board as a non-executive director of the company.
Green's departure comes 24 hours after three Rangers supporters groups - The Rangers Supporters Assembly, The Rangers Supporters Association and The Rangers Supporters Trust - issued a joint statement telling the current board that they wanted Green out.
In a further statement on the club's website, Rangers confirmed the search for Walter Smith's replacement as chairman has begun, while stating the board was "not against" Blin becoming a director.
The statement read: "Following a board meeting this morning the club's directors decided to terminate the consultancy agreement with Charles Green. The decision was unanimous and takes effect immediately.
"However, the board wish to make it clear Mr Green was not the only point on the agenda at today's meeting.
"The directors can state categorically that they have always been open to adding to the current size of the board and are actively seeking a new chairman, one who will bring instant and significant benefits.
"In particular it will be necessary to connect strongly with corporate Britain if the board's ambitions for Rangers are to be fulfilled.
"This board has been working tirelessly to find an intelligent solution to the request for a general meeting and all of the directors are open to sensible and reasonable additions.
"For instance, the board are not against Frank Blin becoming a director but do have reservations about other proposals.
"Even so, the directors remain hopeful compromise can be reached and that everyone, the fans especially, will see this club emerge a much more stable and vibrant operation.
"It is the board's belief that with the right level of understanding from all sides Rangers will prosper and be stronger than at any time in its history.
"This is what the dfirectors are committed to achieving through the work of an enhanced but perfectly balanced board."