Taylor is accused of arming a rebel group in neighbouring Sierra Leone that killed, raped and maimed thousands.
"I cannot take part in this charade that does injustice to the people of Liberia and the people of Sierra Leone," Taylor told the court.
"I have only one counsel to appear on my behalf against nine on the prosecution team. This is neither fair nor just."
According to Khan, Taylor also "terminated his instructions to [his] legal counsel" and asked his defence team to cease to represent him.
"He will represent himself," Khan told the court on Monday.
Julia Sebutinde, the presiding judge, said the trial would continue despite Taylor's failure to attend, as the session quickly got bogged down in legal arguments that delayed the prosecution's opening presentation.
The court then directed Khan to continue representing his client, but the lawyer refused and walked out of court.
"If that's the decision you have taken, so be it," Sebutinde said, directing another member of the defence team, Charles Jalloh, to represent Taylor during the prosecution's opening statement.
Taylor is the first African head of state to go on trial for war crimes before an international tribunal.
He has denied all of the 11 charges of war crimes and crimes against humanity.
Acts of terrorism
Violence to life, health and physical or mental well-being of persons, in particular murder
Sexual slavery and any other form of sexual violence
Outrages upon personal dignity
Violence to life, health and physical or mental well-being of persons, in particular cruel treatment
Other inhumane acts
Conscripting or enlisting children under the age of 15 years into armed forces or groups, or using them to participate actively in hostilities
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His hearing was moved from Freetown, Sierra Leone's capital, to The Hague for security reasons.
Taylor, 59, is seen as the most powerful figure in the conflicts in Sierra Leone and in his own country between 1989 and 2003, but the trial will not cover the wars in Liberia.
Prosecutors allege that he waged "a campaign of terror against the civilian population of Sierra Leone" by arming and training Sierra Leone's Revolutionary United Front (RUF), which murdered and mutilated civilians, raped women and recruited child soldiers.
Taylor is alleged to have been responsible for many of the mutilations, in exchange for still-unknown amounts of so-called blood diamonds.
The decade-long civil war in Sierra Leone left at least 60,000 people dead and thousands mutilated with limbs, ears or noses cut off.
If convicted, the statute of the Sierra Leone tribunal states that Taylor must be sentenced to "imprisonment for a specified number of years" without giving a maximum, meaning he could go to prison for life.
Under the deal to relocate the trial to the Netherlands, it was agreed that if convicted, he would serve his sentence in a British prison.
Taylor follows in the footsteps of former Yugoslav president Slobodan Milosevic, who was the first ever head of state to go on trial for war crimes before an international court.
Milosevic died on March 11, 2006, in the same prison in The Hague where Taylor is now being held, while his trial was still under way before the UN court for the former Yugoslavia.
In the run-up to the trial, Khan repeatedly complained that he did not have enough time or resources to properly prepare for the trial.
He also protested against the change of venue, saying it affected the former president's right to a fair trial.
Rights groups have hailed the trial as a signal that no one is above the law.
|Taylor is accused of enlisting child soldiers|
during the civil war in Sierra Leone [AP]
Stephen Rapp, the prosecutor for the Special Court for Sierra Leone, said: "In the past it has been possible for chiefs of state ... responsible for incredible crimes ... to escape punishment by either remaining in power until their death, or even if they are overthrown or replaced, given the option of safe exile."
But "there can be no peace without justice", he said.
Human Rights Watch stressed that it was important that the trial stay accessible to people in the region.
"People in West Africa need to know what's happening in Taylor's trial," said Elise Keppler of Human Rights Watch's international justice programme.
The prosecution plans to present 150 witnesses and estimates that the trial could be concluded before Christmas 2008.