Cdr David Axon has been removed permanently from the command of HMS Somerset after an investigation into complaints of bullying and harassment.
Cdr Axon will move to a shore-based, non-command post
He was relieved of his command at the weekend to face an internal inquiry into complaints from two crew members about his leadership.
HMS Somerset returned to Plymouth on Thursday after six months in the Gulf protecting Iraq oil platforms.
Cdr Axon has not made any public comment on the allegations.
The equal opportunities investigation found that Cdr Axon's leadership and management style fell "significantly short of the exemplary standards the Royal Navy requires of its commanding officers".
The navy said that Cdr Axon, from Southsea, Portsmouth, would be appointed to a shore-based, non-command post with immediate effect.
A male officer and a female crew member had made separate complaints of a similar nature against Cdr Axon, the Ministry of Defence confirmed.
A spokesman for the MoD said: "We can categorically deny that the allegations were of a racial, sexual or violent nature."
The navy said it would be "inappropriate" to comment on the allegations in order to respect the privacy and confidentiality of people concerned.
However, it said that "the indispensable bond of trust and respect between a commanding officer and the ship's company had been irrevocably damaged" as a result of Cdr Axon's actions .
And it stressed that the investigation had not found any evidence of "mutinous behaviour, insubordination, [or] disobedience" among the ship's company.
Earlier in the week, the MoD said: "The Royal Navy is an equal opportunities employer and is proud of its record.
"The service takes all such matters very seriously and acts swiftly to resolve issues of this nature when they are reported."
Cdr Axon was initially relieved of his command when the ship reached Gibraltar, but his removal has now been made permanent.
The ministry said the decision to recall Cdr Axon to the UK at the weekend was taken because it was "in the interests of all the people concerned".
"A ship is a small community," a spokesman said. "It was entirely appropriate for Cdr Axon to be given time to consider the allegations away from the ship."