The 56-year-old joined the coaching staff midway through the 2000-01 season and helped the Lightning to a Stanley Cup victory in 2004.
"We thank Craig for his seven years of service to this franchise and for his hard work and dedication in helping us become Stanley Cup champions," executive vice-president and GM Jay Feaster said in a statement.
Ramsay played 14 seasons with Buffalo and spent another eight seasons in coaching and management within the Sabres organization. That was followed by various coaching stints with the Florida Panthers, Ottawa Senators and Philadelphia Flyers.
The Lightning finished seventh in the Eastern Conference standings this season with 93 points. Tampa Bay lost to the New Jersey Devils in the first round of the playoffs.
Feaster said head coach John Tortorella has begun the process of identifying and interviewing coaching candidates to serve as his top assistant.
Feaster added it became apparent over the past season that there were some "fundamental philosophical differences between the head coach and associate coach on a number of issues."
"After having a series of meetings with various members of the organization, we have regretfully, yet necessarily, chosen to make a change in the coaching staff effective immediately," he said.
No timetable has been placed on filling Ramsay's position.