The decision comes after another disappointing season for the team which saw them win just eight points and finish seventh in the constructors' championship.
Said the former world champion: "I am surprised by this decision."
The move caps a major reshuffle of the team's Formula One operation, which has also seen drivers Eddie Irvine and Pedro de la Rose dropped.
Lauda replaced former CART CEO Bobby Rahal in August, 2001.
Speaking at a press conference in London this morning, Richard Parry-Jones, head of Ford's Formula One programme, said: "Niki Lauda is relinquishing his role as head of Premier Performance Division (PPD) and Jaguar Racing.
"I have asked Niki to fulfil the role of special advisor to me and I very much hope he will accept the post."
Tony Parnell will take over at PPD but a decision is still to be made on a permanent replacement as team principal.
Added Parry-Jones: "We recognise that it is a key appointment and we do not want to leave it open for very long."
