Hartmut Mehdorn, a former head of Germany's Deutsche Bahn railway firm, will be replaced immediately by Wolfgang Prock-Schauer, 56, the firm said in a statement.
Prock-Schauer was previously chief strategy manager at the airline but has also held chief executive positions at Jet Airways in India and British Midland International.
The chairman of the board at Air Berlin, Hans-Joachim Körber, paid tribute to Mehdorn, saying he had "set the company on a new path" despite what he termed "the crisis in European aviation."
Prock-Schauer would continue with the "decisive reorganisation of the company," Körber said.
Battling powerful headwinds in the aviation sector, especially in Europe, Air Berlin's net losses in the first nine months of the year amounted to €102 million.
However, the third quarter showed a moderate turnaround, with a net profit of €66.6 million on a turnover of €1.39 billion, which the firm put down to results from its cost-cutting drive and tie-up with Etihad Airways.
Air Berlin pencilled in some €230 million in fixed cost reductions in 2012 and said it could not rule out job cuts.
In August, Air Berlin and Etihad Airways, which owns a 30 percent stake in the German firm, were forced to deny reports that Mehdorn was on the way out after disappointing financial results.
Mehdorn, 70, had been in the position "on a transitional basis" since September 2011, the firm said.