In an unprecedented move, the Church has removed Father Thomas Mullen despite Crown prosecutors deciding not to proceed with the case against him because too much time had passed between the alleged offences.
Leading Catholic sources said the move was indicative of a "new resolve" to get to grips with the abuse cases that have rocked the Church in recent years and the willingness of new bishops to address matters.
Archbishop of St Andrews and Edinburgh Leo Cushley told parishioners at Our Lady of Lourdes in Dunfermline of the Vatican's decision at the weekend, claiming "the abuse of minors is something which cannot go unheeded".
One of the alleged victims of Father Mullen has told The Herald that far from celebrating the news he "felt sorry" for the cleric. The man, now in his 30s, is suing the Church for a six-figure sum.
Two alleged victims, who are now in their 30s and 40s, gave statements and the priest was arrested three years ago, with one of the men claiming incidents took place in his home and in the priest's car as well as during two trips to Germany and the US in the early 1990s.
Prosecutors tried to use the Moorov doctrine - a legal mechanism which applies where two or more separate offences are closely connected in time and circumstances - to establish a case.
But the Crown Office decided they could not proceed using Moorov because of the time lag between the alleged crimes.
The Archdiocese of St Andrews and Edinburgh suspended Father Mullen in 2011 while the allegations were investigated by police before ordering a full review into the claims, which were then sent to the Vatican.
Two months ago the Vatican ruled to dismiss Father Mullen, who was once a priest in the same West Lothian parish as shamed Cardinal Keith O'Brien in the 1970s. It made the findings public on Sunday when the appeal period had expired.
Although he will no longer be a priest, the Church has a duty to "look after his practical needs".
In his letter, Archbishop Cushley said: "With the canonical process now completed, I regret to inform you that, in a trial which finished recently in Rome, Father Mullen was found guilty of certain canonical offences. As a result he has been dismissed from the clerical state. This means he may no longer function as a priest.
"I know this is a harsh blow for many of you and I share your sense of shame and distress. I also feel for his family and friends who will recall with affection the good he accomplished. We ought to remember that this sentiment must be balanced against the gravity of the abuse of minors, something which cannot go unheeded, above all when found in someone who ought to be an unequalled example of goodness."
Shortly after being appointed to succeed Cardinal O'Brien, Archbishop Cushley promised to open the archdiocese books on historic abuse cases, something blocked by his predecessor.
The dismissal of the 75-year-old priest, who waived his right of appeal, also comes just weeks after the Vatican sent its chief sex crimes investigator to report on the allegations against Cardinal O'Brien.
Archbishop Cushley said in the letter: "I express the deepest regret of the Archdiocese for what has happened and would ask you to pray for all those whose lives have been affected by the actions of Thomas Mullen."
One church source said: "This is an unprecedented situation, certainly for Scotland. It is unconnected with the investigation into Keith O'Brien but it does indicate a new resolve around these issues."
Prominent solicitor Cameron Fyfe, who represents one of the alleged victims and other abuse cases involving the Catholic Church, said: "This is the first time I've heard of a priest being dealt with in this way. And they have carried this out presumably realising this could impact on court action against them."