Agassi set up Better Place with the aim of using new technology to make electric cars more affordable and more convenient than gasoline-powered cars.
Better Place operates networks of stations where drivers can stop to exchange depleted batteries for new ones, or charge existing batteries, helping increase the cars' range and speeding their mass adoption.
It has started to set up its networks in Israel, Denmark and Australia, although there are limited numbers of electric cars on the roads so far.
Evan Thornley, CEO of Better Place Australia, has replaced Agassi, who will remain as a director, the company said in a statement on Tuesday.
Israeli financial media said Agassi was "ousted", since Better Place has lost nearly $500 million since it was founded.
In the first half of 2012, Better Place saw its loss widen to $132 million from $74 million a year earlier.
Thornley joined Better Place in 2009 and created EV Engineering, a venture between global automotive leaders, to develop and create switchable-battery electric car technology.
Conglomerate Israel Corp owns 32% of Better Place and was an initial investor.
Agassi: My heart will always be here
Several hours after his removal as CEO was announced, Agassi sent a personal letter to Better Place employees.
"I'll remain with the company as a shareholder and board member, but not as CEO," he wrote. "My heart bursts with pride over everything we have done, over the amazing change we created. An electric car with a switchable battery is the future, and the future was created here, in our hands…
"Even not as director, my heart will always be here, at Better Place, out of complete solidarity with the vision, with the wonderful people who walked this fascinating new way with me, from the days when it was just a dream.
"I owe you so much, and I will never forget you, no matter where I am and where you are… Be sure that I will think of you every morning when I get into my electric car," Agassi concluded.