Conrad Black is to step down as chief executive of a global media empire that includes the UK's Daily and Sunday Telegraph newspapers.
Hollinger said the payments to Lord Black were not authorised
The announcement came as the company, Hollinger International, said it was considering putting itself up for sale.
The move follows an internal inquiry which found that Lord Black and other executives had received more than $32m (£19m) in unauthorised payments.
The group's other assets include the Chicago Sun-Times and Jerusalem Post.
It also owns some Canadian newspapers.
Hollinger said Lord Black would leave his post on Friday, but would remain as non-executive chairman.
The company said the payments had not been authorised by its audit committee or its board of directors.
About $7.2m was paid to Lord Black himself, Hollinger added.
Lord Black and the other executives implicated have agreed to repay the company the full amount of the unauthorised payments they received, plus interest, by 1 June 2004, the firm said.
"This really shows that the present movement toward corporate governance reform can even force an organization which is almost completely dominated by one central figure to bow to needed changes," said Paul Hodgson of corporate governance body the Corporate Library.
Hollinger had already been under fire from shareholders because of its complex corporate structure.
Revealing the existence of the unauthorised payments last Friday, the company also said it was delaying the release of its quarterly results.
Hollinger added that its board has also accepted the resignations - with immediate effect - of president and chief operating officer David Radler, vice president Mark Kipnis, and board member Peter Atkinson.
Lord Black has insisted the unauthorised payments were above-board.
LORD BLACK OF CROSSHARBOUR
Born in Canada, 1944
Owner of Daily and Sunday Telegraph, Chicago Sun-Times, Jerusalem Post
Created life peer in 2000
Described as "non-competition" payments, they were paid by buyers of Hollinger International newspapers to prevent the firm from launching new rival titles.
Hollinger shareholders have argued that the payments should have benefited the company rather than its directors.
The company said officials had been unable to produce paperwork showing that its audit committee approved some of the payments to executives.
And other newspaper industry officials have said it is unusual for such payments to go to executives from the company itself.
Lord Black said: "The present structure of the group clearly must be renovated. As the strategic process proceeds we will continue to cooperate entirely with the special committee to resolve corporate governance concerns."
Hollinger has now appointed investment bank Lazard to review its strategic options, which are said to range from a possible sale of the group, to the disposal of one or several of its main assets.
There is growing speculation that the Telegraph newspapers in Britain will be among assets put up for sale.
Some reports have suggested that the Washington Post would be interested in buying them.
Two British newspaper groups have also been named as possible buyers - the Daily Express and the Daily Mail.
Lord Black is to be replaced as Hollinger chief executive by Graham Paris, currently group administrator.
Hollinger now expects to file its quarterly results on Wednesday.
Conrad Black was born in Toronto in 1944 and went on to build up a portfolio of Canadian newspapers.
He expanded his business empire across the Atlantic in the 1980s.
In 2000, he became Lord Black of Crossharbour, taking up a seat in the House of Lords and renouncing his Canadian citizenship.
Hollinger said Lord Black would continue in his role as chairman of the wholly owned subsidiary The Telegraph Group, the immediate publisher of the Daily and Sunday Telegraph papers.
It was Lord Black himself who earlier this year agreed to appoint a special committee to review the unauthorised payments.