Announcing the move, parent company News Corp said it would allow him to focus on expanding the company’s international TV businesses.
The announcement has been seen by many as a way of distancing Mr Murdoch from the scandal that has surrounded New Corp’s UK newspapers.
He has faced intense scrutiny in the wake of the News of the World (NotW) phone-hacking scandal and was noticeably absent at his father Rupert Murdoch’s launch of the new Sunday publication of the Sun.
James Murdoch remains News Corp deputy chief operating officer and keeps responsibility for BSkyB, but NI chief executive Tom Mockridge, appointed after former NotW editor Rebekah Brooks was forced to resign because of the hacking scandal, will now report to News Corp president and chief operating officer Chase Carey.
Rupert Murdoch, News Corp’s chairman and chief executive officer, said: “We are all grateful for James’s leadership at News International and across Europe and Asia, where he has made lasting contributions to strategy in paid-digital content and its efforts to improve and enhance governance programmes. He has demonstrated leadership and continues to create great value.
“Now that he has moved to New York, James will continue to assume a variety of essential corporate leadership mandates, with particular focus on important pay-TV businesses and broader international operations.”
His 39-year-old son said: “I deeply appreciate the dedication of my many talented colleagues at News International, who work tirelessly to inform the public, and am confident about the tremendous momentum we have achieved under the leadership of my father and Tom Mockridge.
“With the successful launch of the Sun on Sunday and new business practices in place across all titles, News International is now in a strong position to build on its successes in the future.
“As deputy chief operating officer, I look forward to expanding my commitment to News Corporation’s international television businesses and other key initiatives across the company.”
Speculation that the move is a way of separating Mr Murdoch jnr from his family’s UK news-paper business was supported by reports that Mr Carey said News Corp’s executives had talked about selling off or separating the newspaper operations from the rest of the business.
Bloomberg reported Mr Carey told a media conference there was an awareness that News Corp shares would trade higher if it did not own newspapers.
After yesterday’s announcement about Mr Murdoch, News Corp shares were 2 per cent higher on Wall Street.
John Whittingdale, chairman of the Commons culture, media and sport committee, which is carrying out its own inquiry into phone-hacking allegations, suggested that his departure might be an indication of News Corp’s determination to preserve its newspaper empire in the UK.
“If News International wanted to move on, to start afresh, then his presence was always going to be a problem for them,” he said.
“To some extent, the decision to withdraw James Murdoch from the UK may be connected with their wish to remain in the UK and to demonstrate the people now running the company are completely unconnected with what has happened over the course of the last few years.”