Piers Morgan was kicked out by the board of media group Trinity Mirror on Friday, which said it was "inappropriate" for him to continue as editor.
"There is now sufficient evidence to suggest that these pictures are fakes and that the Daily Mirror has been the subject of a calculated and malicious hoax," the paper said.
"The Daily Mirror therefore apologises unreservedly for publishing the pictures and deeply regrets the reputational damage done to the QLR (Queen's Lancashire Regiment) and the Army in Iraq," it said.
"The Board of Trinity Mirror has decided that it would be inappropriate for Piers Morgan to continue in his role as editor of the Daily Mirror and he will therefore be stepping down with immediate effect," added the newspaper.
The media group said it "published in good faith photographs which it absolutely believed were genuine images of British soldiers abusing an Iraqi prisoner" and would now "continue to cooperate fully with the investigation". Deputy editor Des Kelly will assume the role of acting editor.
Morgan's departure from the Mirror, a vociferous opponent to the US-led war in Iraq, was seen as a moral victory for Prime Minister Tony Blair and his government, which argued in parliament this week that it did not believe the photos were genuine.
The Daily Mirror's pictures first appeared on 1 May, just days
The Daily Mirror says it has been
'the subject of a hoax'
after the American television network CBS aired the first startling photos of US troops abusing and torturing Iraqis in Abu Ghraib prison.
One of the British pictures showed a soldier urinating on a hooded man on the floor, another purported to show the same man, also hooded, being threatened with a blow of a rifle butt to his groin.
In none of pictures can a soldier's face be seen - in contrast to the Abu Ghraib images, in which they were visible and identifiable.
Experts immediately questioned the photos, noting that the truck, assault rifle and floppy hat seen in them were not identical to those used by the 8000 British troops who occupy southern Iraq.
There were conflicting reports in London as to whether Morgan, one of Britain's youngest and most combative newspaper editors, was fired, or whether he bowed to pressure from his proprietors to resign.