Helmut Metzner, chief of staff for FDP leader Guido Westerwelle, who is German vice chancellor and foreign minister, was exposed on Thursday evening as the source of leaks from talks in October 2009 on forming a ruling coalition with Chancellor Angela Merkel's conservatives.
"The staff member of the FDP's federal headquarters, who has admitted his contacts with the US embassy in Berlin, has been relieved of his duties as chief of staff for the FDP chairman by mutual agreement," the party's spokesman said in a terse statement.
Diplomatic cables published this week by Wikileaks showed that an FDP mole at the closed-doors negotiations between the party and Chancellor Angela Merkel's Christian Democrats had given regular updates to a US embassy contact.
In the documents, Philip Murphy, the US ambassador in Berlin, describes the fly on the wall as a "young, up-and-coming party loyalist" who was taking notes during the marathon talks.
On Friday, FDP MP Hans Michael Goldmann told the daily Bild that Murphy could no longer serve as an effective liaison between Berlin and Washington.
"Mr. Murphy's behaviour is unseemly," Goldmann said. "Such an ambassador should be called home."
Another FDP deputy, Bijan Djir-Sarai, echoed the sentiment: "It is more than doubtful whether Mr Murphy can still be a trustworthy interlocutor."
However Merkel's spokesman Steffen Seibert said Berlin would continue to work with Murphy.
"The government is most certainly not calling for the ambassador to be recalled. It is focused on the many tasks that it shares with America, in terms of the global economy, Afghanistan, the G8-G20 process, cooperation in NATO," he told a regular briefing. "German-US ties are robust."
Among the indiscretions by the FDP's Metzner were a blow-by-blow account of an internal row over disarmament.
Westerwelle had pushed to have the new government demand the United States remove its nuclear weapons from German soil but Merkel dismissed his call as pointless without a broad-based international initiative.
The source is later quoted as describing veteran conservative Wolfgang Schäuble, the current finance minister as "neurotic" and "an angry old man," before handing over several copies of documents from the negotiations.
The daily Frankfurter Allgemeine Zeitung said that despite the revelations, Metzner, 41, would continue to work for the party.
On Monday, Westerwelle told reporters he did not believe his party had a spy in its ranks.
"I don't believe such stories," he said, adding that he "still had quite strong faith in the entire staff of the FDP, and particularly those who were present at the coalition talks."
Westerwelle comes in for harsh criticism in the secret documents published by Wikileaks, derided by US diplomats as incompetent, vain and critical of America.