The 29-year-old has not raced since being withdrawn from competition by his team last September following the discovery of discrepancies in his biological passport.
Sir Dave Brailsford, the Team Sky Team Principal, said: "Jonathan's contract has been terminated today. Whilst there have been no doubts about his time with us, his doping violation - from readings taken before he joined this team - means there's no place for him in Team Sky.We've a well-known stance on anti-doping and our action is the inevitable outcome of a violation. This is a team that trains, races and wins clean."
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Tiernan-Locke, who won the 2012 Tour of Britain, had maintained his innocence when the discrepancies were first made public in December last year.
In a statement, Team Sky stressed the violations took place prior to their signing of Tiernan-Locke but added the team had reviewed their recruitment process as a result of the episode.