The Saudi Foreign Ministry said on Wednesday that Prince Bandar would be replaced by Prince Turki al-Faisal, the former intelligence chief who is ambassador to London.
A ministry statement said Bandar had asked the king to relieve him of his duties for private reasons “after more than 20 years of distinguished service”.
Bandar had asked to be relieved of his post a month ago.
The king agreed to his request and issued orders to start the process of nominating Turki al-Faisal in his place, the statement said.
Saudi Arabia has been a close Arab ally of the United States for more than 50 years and the kingdom’s ambassador in Washington is a job that carries significant weight, and is at the centre of the oil-rich kingdom’s foreign policy.