"I believe in a politics that is open, tolerant and united. David Ward is unfit to represent the party and I have sacked him," the Liberal Democrat leader said.
Farron intervened after a backlash from the British Jewish community over Ward's selection as the party's candidate for Bradford East, the seat he lost at the 2015 general election.
Ward has proven to be a controversial character, most recently claiming that "terrorist attacks in [the] UK stem from our foreign policy" in the wake of the assault on Westminster in March.
He was suspended from the Liberal Democrats in 2013 after accusing "the Jews" of "inflicting atrocities on Palestinians" in a blog post about Holocaust Memorial Day.
A Board of Deputies spokesperson said before Farron's move: "It is deeply disappointing to us and very embarrassing for the Liberal Democrats that David Ward has once again been selected."
A Liberal Democrat source told IBTimes UK that the party would seek to select a new candidate for the Bradford East seat as soon as possible. Labour's Imran Hussain is defending the constituency with a majority of more than 7,000 votes.
Ward had not responded to a request for comment at the time of publication.