The Orthodox Church has demoted Irineos, its former Patriarch of Jerusalem, to the rank of simple monk.
The Patriarch is still refusing to step down
Irineos had refused to resign after being accused of selling Church land in Jerusalem traditionally occupied by Arabs to Jewish investors.
He denied wrongdoing, but Church leaders voted last month to isolate him, in effect removing his authority.
A special court had condemned Irineos in absentia as he declined invitations to appear before it, the Church said.
An aide to Irineos said he would not step down, but would issue a statement on Friday.
He was the religious head of 100,000 Christians in the Holy Land, most of them Palestinian.
Archbishop Cornelios has assumed the patriarch's duties until a permanent replacement can be found.
The BBC's Barbara Plett in Jerusalem says that legally, Church leaders cannot dismiss the patriarch.
That can only be done by the governments of areas where his congregation lives - namely Israel, Jordan and the Palestinian Authority. Only Jordan has so far agreed to do this.
Irineos was accused of "anti-canonical and anti-ecclesiastical actions", a Church statement said.
"These actions led the Church to the threshhold of a schism. In order to avoid the consolidation of the schism and safeguard the unity of the body of the Church ... this painful action was deemed necessary."
The statement warned congregations to "close their ears to misleading information".
Ecumenical Patriarch Bartholomew I, who chaired the meeting, described the decision as "very sad".
The Greek government also called on Irineos to accept his dismissal.
At the centre of the dispute is the sale of land owned by the Greek Orthodox Church situated just inside Jerusalem's Old City.
Christian Palestinians living there hope that if a peace deal with Israel is agreed, it will form part of a future Palestinian capital.
The concern is that the new owners may attempt to create a Jewish presence in a traditionally Arab area, and impede the creation of a Palestinian-controlled zone.
Irineos, who was said to be trying to revoke the sale, said he never agreed to the transaction but there is speculation that one of his deputies may have signed the deal on his behalf.