Pope Francis has bowed to the rebels of Ahiara Diocese in Imo state and abandoned Bishop Peter Ebere Okpaleke, after priests and laymen rejected his appointment for six years.
In a reaction, Okpaleke has resigned from his post.
A Vatican statement said the pope had accepted the resignation. It said the position had been declared vacant and that a papal administrator would run it for the time being.
The embattled priest resigned after the Vatican failed to quell fierce objections over his nomination because he did not belong to the local clan of the Igbo ethnic group. Okpaleke is from Anambra state.
The Vatican announced the resignation of Okpaleke on Monday, six years after Pope Francis's predecessor, Benedict XVI, named him to the post.
Okpaleke was never able to take up the post because the priests and laypeople of the diocese insisted that their bishop must be from their clan.
Pope Francis initially took a firm stand in defending the nomination, summoning Ahiara clergy to the Vatican in June last year.
He demanded "obedience" and gave the rebel priests 30 days to "ask his forgiveness" and accept Okpaleke's appointment or face the sack.
Those who did not write such a letter would face suspension from the priesthood, the pope told them at the time. Francis also demanded that the rebellious priests write a letter of apology to Okpaleke.
But the row was not resolved, and Cardinal John Onaiyekan, archbishop of the Nigerian capital Abuja, has run the diocese as a temporary measure since July.
Fides, the Vatican's missionary news agency, on Monday, published excerpts from Okpaleke's resignation letter, saying he had not been able to take possession of diocese or even live within its territory because of continuing "violent reaction and resistance."
Fides said some 200 priests had written to the pope promising their obedience. But many had also told the pontiff that they had "psychological difficulty in collaborating with the bishop after years of conflict."
The agency, which is controlled by the Vatican, said the rebellious priests should "reflect on the grave damage inflicted on the Church" through their "unreasonable actions opposing a bishop legitimately appointed by the Supreme Pontiff."
In his resignation letter, Okpaleke said remaining bishop in Ahiara would not be beneficial to the Church.