"We the undersigned have decided to discharge you since we cannot continue to work together," a statement signed by Saddam's wife and three daughters, referring to Jordanian lawyer Muhammad Rashdan, reportedly said.
Other members of Saddam's Amman-based defence team confirmed Rashdan had been suspended, accusing him of acting alone and seeking to be the sole lawyer for the former Iraqi president.
Lawyer Ziyad al-Khasawna told Aljazeera that Rashdan "went alone to the special court, without the rest of the defence team, seeking power of attorney".
Therefore, he added, Saddam's family "has decided to expel him from the team and asked him to hand over all documents he has".
Al-Khasawna said the defence team had agreed and asked Rashdan to submit to the Saddam family's demands.
"The expulsion is absolutely final and it will not affect Saddam's trial at all," he said.
The lawyer said the court had not met any of the defence team's demands yet.
Contacted by reporters, Rashdan dismissed the charges and in turn accused Khasawna and Jordanian lawyer Hatim Shahin of misappropriating $270,000 that had been earmarked for Saddam's defence.
"These were donations which they never submitted to the defence team," Rashdan said.
Saddam was brought before an Iraqi court on 1 July, just three days after the end of the US-led occupation, for an initial hearing on seven charges of crimes against humanity.
Among the charges were the 1988 gassing of the Kurds in Halabja, the suppression of the 1991 Shia Muslim uprising in southern Iraq and the previous year's invasion of Kuwait.