The German stock exchange operator Deutsche Boerse, which compiles the index, made the announcement late on Wednesday. The change takes affect on Sept. 24.
Commerzbank's exit from the benchmark index paves the way for the entry of Wirecard, a payments company founded in 1999 whose market value is now double that of Commerzbank.
Deutsche Boerse periodically reassesses the composition of the index using trading data to measure market value and trading volume as a basis for deciding which companies to include. It also announced a shakeup of the composition of three key indexes that affects technology stocks.
Commerzbank, the nation's second-largest lender, was one of 30 founding members of the DAX in 1988.
The bank's expulsion had been widely expected, with its shares down 32 percent this year and a market capitalisation of 10.6 billion euros.
But it is still a blow for the 148-year-old bank that dominates Frankfurt's skyline. It comes days after its larger crosstown rival Deutsche Bank learned it would be expelled from the Eurostoxx 50 index of leading European stocks.
"It shows the extent to which German banks have fallen behind other industrial companies in Germany and Europe," said Klaus Nieding of shareholder lobby group DSW.
Commerzbank's chief executive Martin Zielke said in a statement after the announcement that "nothing changes for our customers and our business".
"At the moment it is obviously the case that the market values fintechs more highly than traditional banks," he said.
"This development shows that our strategy is the right one and spurs us on to push ahead with the transformation into a digital enterprise."
The German government still owns a 15 percent stake in Commerzbank after bailing it out during the financial crisis. The bank has been reducing staff and is trying to cut back-office bureaucracy to restore profitability.
As Germany's banks continue to battle with a legacy of bad debts, bloated headcounts and fines a decade after the global financial crash, Wirecard is benefiting from the power and scalability of platform economics.
With a staff of less than 5,000 - one tenth that of Commerzbank - Wirecard offers "omnichannel" payments solutions to merchants; risk management; real and virtual payment cards; and even has a German banking licence.
Deutsche Boerse also provided details of the stocks included in its revamped midcap index MDAX, smallcap index SDAX and technology focused TecDAX index.
Technology shares will now be included in the MDAX and SDAX. Previously, medium and small technology stocks were only included in the TecDAX index.
Also, bluechip technology stocks in the benchmark DAX index will also be included in the TecDAX index. SAP, Deutsche Telekom and Infineon Technologies, for example, are also now included in the TecDAX.
The change increases the number of companies in the MDAX to 60 from 50 and in the SDAX to 70 from 50.
(Reporting by Tom Sims; editing by Andrew Roche)