Increase performance of removing character from String
Learn from existing implementations, they usually have solutions to corner cases, common pitfalls and performance bottlenecks. For example, Apache Commons Lang StringUtils also has a remove function. It's implementation is quite simple and similar to yours:

public static String remove(final String str, final char remove) {
    if (isEmpty(str) || str.indexOf(remove) == INDEX_NOT_FOUND) {
        return str;
    }
    final char[] chars = str.toCharArray();
    int pos = 0;
    for (int i = 0; i &lt; chars.length; i++) {
        if (chars[i] != remove) {
            chars[pos++] = chars[i];
        }
    }
    return new String(chars, 0, pos);
}


Anyway, there are some differences:


It uses char array. Strings are immutable, the following concatenation creates a new String object:

newstr = newstr + str.charAt(i);


I guess it's slower than changing a value in an array.


  Using the string concatenation operator
  repeatedly to concatenate n strings requires time quadratic in n.


Source: Effective Java, 2nd edition, Item 51: Beware the performance of string concatenation
At the first line it checks whether the String contains the removed character at all. If it doesn't contain it remove saves the creation the char array. It might help but it depends on your input.
The code in the question calls String.charAt() in the comparison which checks the given index:

public char charAt(int index) {
    if ((index &lt; 0) || (index &gt;= value.length)) {
        throw new StringIndexOutOfBoundsException(index);
    }
    return value[index];
}


The StringUtils implementation skips this test since it knows that the index is valid.


(See also: Effective Java, 2nd edition, Item 47: Know and use the libraries)