Michael Woodford, 51, took over as president in April after 30 years at the company, becoming one of only a handful of non-Japanese to run a large Japanese corporation.
In a blunt statement, the board of Olympus said Woodford "has largely diverted from the rest of the management team in regard to the management direction and method and it is now causing problems for decision-making by the management team."
Woodford - who in a recent magazine interview was equally blunt about his management style – told Reuters in May he would cut jobs to achieve his mid-term cost targets and reverse a slump in earnings while avoiding forced redundancies in Japan for cultural reasons.
Japanese boards rarely dismiss top executives, even when the company is struggling. The boards are often criticised by corporate governance advocates for failing to hold management accountable on behalf of shareholders.
Olympus said Woodford was "unanimously" dismissed as president and chief executive officer, but will remain as a director until that position is voted upon at the next annual shareholders meeting.
The company's chairman, Tsuyoshi Kikukawa, will take over as president and chief executive.