The official is said to have acted as a CIA contact at the US embassy, reports say, in a scandal that has infuriated German politicians.
A German intelligence official was arrested last week on suspicion of spying.
An inquiry has also begun into a German defence ministry worker, reports said.
"The representative of the US intelligence services at the embassy of the United States of America has been told to leave Germany," government spokesman Steffen Seibert said.
Analysis by Rajini Vaidyanathan, BBC News, Washington
Earlier this week the White House described the partnership between the US and Germany as one built on respect. But no-one likes to be spied on, especially when it's your friend doing the spying.
This latest episode is yet another reminder of how American surveillance programmes are causing friction with allies. It's angered many in Germany, where the issue of snooping is historically a very sensitive one, and many are asking: "What? Again?"
It wasn't too long ago, after all, that we heard the National Security Agency was spying on Chancellor Merkel's mobile phone. After a review into the surveillance programmes, President Obama promised the US wouldn't spy on its friends overseas.
But despite requests to be included, Germany isn't part of a non-spying pact the US has with Britain, New Zealand, Australia and Canada. The White House will want to do all it can to repair any trust issues over this latest incident, so they can work together in other areas - for example, it needs German support for tougher sanctions against Russia over Ukraine.
Analysis by Stephen Evans, BBC News, Berlin
The request by the German government follows increasing frustration that it has failed to get US assurances that spying would cease on German citizens from Chancellor Merkel down.
She was shocked to learn that her mobile phone conversations were secretly being monitored while President Obama was greeting her as a friend on his visit to Berlin.
Chancellor Merkel has tried to maintain a balance between condemning America's actions but also maintaining cordial relations. Each revelation has made that balance harder to achieve.
This matters because America needs German help on a range of issues from trying to get the world economy out of its difficulties, to finding united Western action on Russia, to dealing with the revelations emanating from Edward Snowden who is currently in Moscow but whom some German lawmakers want to invite to Berlin.
The chairman of the Bundestag (parliament) committee overseeing the secret service said the action had been taken because of America's spying on German politicians and its failure to co-operate and provide adequate responses.
The US has not denied allegations that a German intelligence agency employee arrested last week was passing secret documents to the US National Security Agency (NSA).
However, the latest reports that an employee within the defence ministry was also spying for the US were considered more serious. Although no arrest was made, searches were carried out on Wednesday at the ministry and elsewhere.
The US and Germany have been close allies for decades but relations were hit last year when it emerged that Chancellor Angela Merkel's mobile phone had been monitored by the NSA.
The White House declined to comment on the matter but said the security and intelligence relationship with Germany "is a very important one and keeps Germans and Americans safe".
"It is essential that co-operation continue in all areas and we will continue to be in touch with the German government in appropriate channels," spokeswoman Caitlin Hayden said.
October 2013: German Chancellor Angela Merkel calls US President Barack Obama after revelations that the US may have spied on her mobile phone
June 2014: Germany announces an investigation into the claims
4 July 2014: A suspected US spy said to be working for the German intelligence agency is arrested
9 July 2014: A second case emerges as searches are carried out at the defence ministry
10 July 2014: German government orders expulsion of CIA official
On Thursday, Mrs Merkel said spying on allies was a "waste of energy".
"We have so many problems, we should focus on the important things," she said.
"In the Cold War maybe there was general mistrust. Today we are living in the 21st Century. Today there are completely new threats."
German Interior Minister Thomas de Maiziere said the information that the US appeared to have gained from the suspected espionage was "laughable" but the political damage was "disproportionate and serious".
The scale of the US agency's surveillance was revealed by former NSA contractor Edward Snowden, who fled the US and is now a fugitive in Russia.
The German intelligence official arrested last week was alleged to have been trying to gather details about a German parliamentary committee investigating the NSA spying scandal.
When Mrs Merkel visited the White House in May, President Barack Obama sought to assure her and the German people they were not subject to "continual surveillance" by the US.
He said "complicated issues" were involved but he anticipated that the matter would be resolved to the satisfaction of both countries.
The German government has ordered the expulsion of a CIA official in Berlin in response to two cases of alleged spying by the US.