Trump, who said he would nominate in her place Oklahoma Republican Senator Markwayne Mullin, made the announcement on social media on Thursday, two days after Noem faced a grilling on Capitol Hill from Republican members as well as Democrats.
Trump said he would make Noem a "Special Envoy for The Shield of the Americas," a new security initiative that he said would focus on the western hemisphere.
Noem took the stage to address a Department of Homeland Security event moments after Trump's announcement but made no immediate mention of her ouster.
Instead, she read from prepared remarks, including reinforcing Trump's message from the State of the Union last month.
Noem is the first cabinet secretary to leave during Trump's second term.
Noem's departure caps a tumultuous tenure overseeing immigration enforcement tactics that have been met with protests and lawsuits.
Her tenure looked increasingly short-lived after hearings in Congress this week where she faced rare but blistering criticism from Republican lawmakers.
One particular point of scrutiny was a $US220 million ($A315 million) ad campaign featuring Noem that encouraged people in the country illegally to leave voluntarily.
Noem told lawmakers that Trump was aware of the campaign in advance but Trump disputed that in an interview on Thursday with Reuters, saying he did not sign off on the ad campaign.
"I never knew anything about it," Trump said in the phone interview.
The ads prominently featured Noem, including a scene of her on horseback at Mount Rushmore in her home state of South Dakota.
Noem has faced waves of criticism as she has overseen the administration's immigration crackdown, especially since the shooting deaths of two protesters in Minneapolis at the hands of immigration enforcement officers.
The former South Dakota governor was also criticised over the way her department has spent billions of dollars allocated to it by Congress.
Aside from immigration, Noem also faced criticism - including from Republicans - over the pace of emergency funding approved through the Federal Emergency Management Agency and for the administration's response to disasters.
Mullin would need to be confirmed by the Senate but under a federal law governing executive branch vacancies, he would be allowed to serve as an acting Homeland Security secretary as long as his nomination is formally pending.
with Reuters
