JetBlue said he would carry on as non-executive chairman playing a more strategic role.
The budget carrier replaced Neeleman, 47, with president and chief operating officer Dave Barger, 49, effective immediately.
The sudden change in leadership comes after JetBlue suffered an embarrassing service disruption on Feb. 14 that exposed weaknesses in the seven-year-old airline's operations.
A Valentine's Day ice storm stranded passengers on planes for hours, led to nearly 1,200 flight cancellations over several days, and cost the company more than $30 million.
"The board suggested to David that he could best serve the company in a more strategic role. David agreed," JetBlue spokeswoman Jenny Dervin said. "The conversation was initiated by the board."