Vice-Adm Tim Giardina, second-in-command of the US Strategic Command, is under investigation for illegal gambling activities.
He is accused of using counterfeit gambling chips in "a significant monetary amount" at an Iowa casino.
Adm Giardina was demoted to a two-star admiral and will be reassigned pending outcome of the inquiry.
On Wednesday, the Navy's top spokesman Rear Adm John Kirby announced the removal of Adm Giardina as the deputy in charge of the US Strategic Command.The case was referred to the US Naval Criminal Investigative Service after he first came to be suspected of the crime.
Adm Giardina, a career submarine officer, was suspended from duty on 3 September after the military launched an investigation into allegations he used counterfeit chips at a casino not far from his base in eastern Nebraska.
In September, Special Agent David Dales of the Iowa Division of Criminal Investigation told the Associated Press news agency "a significant monetary amount" was involved.
"We were able to detect this one pretty quickly and jump on it," he added.
It is unknown whether Adm Giardina's alleged actions at the Horseshoe Casino in Council Bluffs, Iowa, compromised national security or operations at Strategic Command.
Strategic Command, which oversees everything from America's land-based nuclear missiles to space operations governing military satellites, is located at Offutt Air Force Base near Omaha, Nebraska.
Adm Giardina's demotion follows several other incidents affecting the US military's nuclear establishment.
In August, a nuclear missile unit at Malstrom Air Force base in Montana failed a safety and security inspection, after which a senior security officer was relieved of duty.
In May, it was reported that 17 officers in charge of maintaining nuclear missiles were sidelined over safety violations at Minot Air Force base in North Dakota.
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