Jubeir, one of Riyadh's most frequent public spokesmen, was replaced as the kingdom struggles to block U.S. Senate resolutions calling for an end to U.S. military support for the war in Yemen and blaming Crown Prince Mohammed, Saudi Arabia's de facto ruler, for the murder of Khashoggi.
Saudi King Salman has appointed former finance minister Ibrahim al-Assaf as foreign minister in a major cabinet reshuffle that included changes to key national security posts, state media reported on Thursday.
The Saudi government has come under intense global criticism over the murder of US-based journalist Jamal Khashoggi inside the Saudi consulate in Istanbul in October.
Assaf replaces Adel al-Jubeir, who was appointed Minister of State for Foreign Affairs.
Gen. Khalid bin Qirar Al Harbi has been appointed as the head of general security.
Abdul Aziz Bin Turki Al-Faisal has replaced Turki Al-Sheikh as president of the Sports Authority, while Turki Al-Sheikh has been appointed as Chairman of the Entertainment Authority.
The changes appear to further consolidate the crown prince's grip on power by appointing advisers and members of the royal family seen as close to him.
After serving as finance minister, he was locked in the Riyadh Ritz-Carlton past year with hundreds of princes, businessmen and officials in what the government called an anti-corruption campaign.
Al-Assaf sits on the boards of oil-giant Saudi Aramco and the kingdom's sovereign wealth fund.
Jubeir, who sought to defend the tainted government internationally after Khashoggi's murder, was effectively demoted to minister of state for foreign affairs, the decree added without explaining the change.
"Because the Saudi consul general in Istanbul was very much involved in the killing of Khashoggi and that would fall under al-Jubeir".
"I think he is out now - perhaps at the right time for Crown Prince Mohammed bin Salman".
Western intelligence agencies have concluded that Prince Mohammed knew about and most likely ordered the plot to kill Khashoggi.
One significant change affects a close aide of Prince Mohammed, Turki al-Sheikh, who was named as head of the kingdom's general entertainment authority, a body created in recent years to help organise and promote concerts and other events that had always been banned in the conservative country. Hamad al-Sheikh, a royal court adviser and former college dean who studied in the US, was appointed minister of education. He will lead a new national space agency.
Prince Salman was the first Arab and Muslim to travel into space in 1985, helping to deploy a satellite for the Arab Satellite Communications Organisation with NASA. Prince Abdullah had been deputy governor of Mecca.
The surprise shake up saw the appointment of a new National Guard chief and the replacement of the information minister and the head of the tourism authority, but the ministries of energy and finance were left untouched despite an economic downturn.