James Murdoch, 39, will remain News Corp.'s deputy chief operating officer and focus on international television operations, the New York-based media and entertainment giant said in a statement.
News International has been embroiled in a phone-hacking scandal which has seen the arrests of several former top editors and the abrupt closure last year of the News of the World.
The Sun, another News International paper, is now also facing ethics charges.
A public inquiry into press standards heard from a top British police officer on Monday that journalists at The Sun had made cash payments to a "network of corrupted officials."
James Murdoch has long been seen as the heir apparent to his 80-year-old father, but Rupert Murdoch was accompanied by another son, Lachlan, 40, on a visit this month to The Sun, during which plans were announced to launch a Sunday edition of the tabloid.
News Corp. said James Murdoch was stepping down from News International following his relocation to company headquarters in New York as deputy chief operating officer, a move which took place last year.
"James will continue to assume a variety of essential corporate leadership mandates, with particular focus on important pay-TV businesses and broader international operations," Rupert Murdoch, the chief executive of News Corp., said in a statement.
"We are all grateful for James' leadership at News International and across Europe and Asia, where he has made lasting contributions to the group's strategy in paid digital content and its efforts to improve and enhance governance programs," Rupert Murdoch said.
"He has demonstrated leadership and continues to create great value at Star TV, Sky Deutschland, Sky Italia, and BSkyB."
James Murdoch said that with the "successful launch of The Sun on Sunday and new business practices in place across all titles, News International is now in a strong position to build on its successes in the future.
"As deputy chief operating officer, I look forward to expanding my commitment to News Corporation's international television businesses and other key initiatives across the company," he said.
Tom Mockridge will remain as chief executive of News International and will report to News Corp. chief operating officer Chase Carey.
James Murdoch's departure from News International was greeted with little surprise in Britain.
Opposition Labour lawmaker Chris Bryant, a victim of phone hacking by the News of the World, said James Murdoch was leaving News International "under a very dark cloud."
"It is time he also left BSkyB. He is not a fit and proper person," Bryant added, referring to the pay-TV giant of which James Murdoch is chairman.
Andrew Neil, a former editor of another News International newspaper, the Sunday Times, said he believed Rupert Murdoch had decided his son was no longer useful in managing his British titles.
Neil also told BBC television that James Murdoch "still has a lot of questions to answer" over what he knew about the phone-hacking scandal.
James Murdoch appeared twice before a British parliamentary committee last year as part of its investigations into phone hacking, and both times he denied knowing the practice was widespread.
News Corp. has settled dozens of claims brought by victims of phone-hacking by the News of the World, including a £600,000 ($952,000, 710,000-euro) deal with singer Charlotte Church agreed on Monday.
Deputy Assistant Commissioner Sue Akers told the latest inquiry that The Sun had a "culture" of paying police, the military, health workers, government and prison staff.
The 168-year-old News of the World was shut down in July after it emerged it had hacked into the voicemails of Milly Dowler, a missing British schoolgirl who was later found murdered.