Vinayagamoorthi Muralitharan, who is also known as Karuna and commands 6000 of the rebels' 15,000-strong army, was cited by one of his top officers as saying: "There will be no change in my position."
"I will not give up my command," the official, who spoke on condition of anonymity, quoted Muralitharan as saying.
"It's very ridiculous to make a statement that I am expelled, when it was we who first decided to break away and have our own administration."
At a press conference earlier on Saturday in Kilinochchi, a northern rebel town, the Tigers' political chief SP Thamilselvan said Muralitharan "has been relieved of all responsibility".
"The action of a single individual running contrary to the aspirations of the Tamil people cannot be tolerated whatever the consequences may be."
"He was acting as traitor to the Tamil people," Thamilselvan added.
The split complicates an already fragile peace process that is stalled over a political struggle in the government, which the Tigers say shows the majority of Sinhalese are not serious about negotiating peace.
But Thamilselvan said "we ensure the peace process will not be disrupted by an action taken by an individual. The leadership is clear in its commitment to continue with the ceasefire and the peace process and talks that may resume at anytime".
Code of loyalty
The Tigers have a strict code of loyalty and previous challengers to LTTE leader Velupillai Prabhakaran have been assassinated.
Karuna has differed with Prabhakaran in the past, but was one of the negotiators in peace talks that stalled last April.
"The action of a single individual running contrary to the aspirations of the Tamil people cannot be tolerated whatever the consequences may be... he was acting as a traitor to the Tamil people"
Political chief, Tamil Tigers
"The command structure and cadres under Karuna have remained loyal to Mr Prabhakaran," Thamilselvan said, adding Karuna's decision to strike out on his own "was a personal matter".
Analysts speculated Karuna was upset over recent killings of Tamil politicians in the east who were opposed to the Tigers, allegedly ordered by a rebel intelligence unit in the north.
Others said Karuna was unhappy because he had no say in the list of candidates in the east for the Tamil National Alliance, a party the Tigers endorsed in the elections.
"We will consult further with the leadership and decide on what action to take," Thamilselvan said when asked what would happen if Karuna resisted efforts to remove him.