King Abd Allah told Prince Hamza in a televised message on Sunday that he "decided to relieve you of your responsibility as crown prince to allow you to have more freedom of movement".
Abd Allah did not give further explanation for his move, but said the title of crown prince will be shelved for the time being.
It is not immediately clear if he could be renamed in the future.
In an emotional message, read over the state television, King Abd Allah praised Hamza, describing him as a "sincere soldier of this nation".
The king said the crownship was an "honorary position, which does not give authority for its holder nor does it give him any responsibility".
Hamza, 24, got married last May
in the Jordanian capital Amman
"That had prevented me from assigning you certain responsibilities," the king said.
Abd Allah added the nation "needed all of us" to work collectively in the interests of Jordan.
Hamza, 24, was married in May. King Abd Allah named Hamza crown prince hours after their father died of cancer on 7 February 1999. King Husain, who had 11 children from four marriages, had often described Hamza in public as the "delight of my eye".
Hamza, who resembles his father in looks, bearing and husky voice, is Husain's son from his fourth marriage - to New York-born Lisa Halaby, who took the name Queen Nur when she converted to Islam upon her marriage to Husain in 1978.
Crown prince's duties
Abd Allah is Husain's eldest son. His mother is Englishwoman Antoinette Gardiner, who became known as Princess Muna after she became Husain's second wife.
As crown prince, Hamza's duties included representing the king at events at home and abroad. He oversaw several national institutions, including a prominent thinktank. Hamza also flies helicopters, parachutes, scuba dives, fences and practices taekwondo.
The decision came as a surprise to Jordanians, but there are no apparent political motives for the move since Prince Hamza has not been playing any political role, according to Aljazeera's correspondent in Amman, Yasir Abu Hilala.
Hamza resembles his father in
looks as well as voice
Jordanians have rarely seen Prince Hamza; the last time was during his wedding last year, Abu Hilala said.
Hamza attended the Royal Military Academy in Sandhurst, England, graduating as a commissioned officer in the Jordan Arab Army in 1999. He served with the Jordan-United Arab Emirates force in the former Yugoslavia as part of an international peacekeeping force.
According to Abu Hilala, although things are not clear at the moment with regard to crown prince candidates, King Abd Allah has two options: either to appoint one of his brothers, Prince Faisal or Prince Ali, or appoint his own son, Prince al-Husain.