Mr Werner had unsuccessfully resisted attempts by Juergen Schrempp, Daimler's chief executive, to merge Mercedes within the overall structure of the parent company. Mercedes, which accounts for three-quarters of Daimler's sales and is regarded as the group's cash-cow, will lose its seven-year independence as a result of the restructuring.
In a statement the company said it was Mr Werner's "feeling that the new organisational structure of Daimler-Benz did not offer a scope of responsibility commensurate with his industrial experience".
Other positions for Mr Werner within the Daimler-Benz board had been discussed but none satisfied his expectations, the statement said. Last night it remained unclear when Mr Werner's resignation would take effect. In accordance with German corporate practice no mention of Mr Werner's pay-off was made either.
Mr Werner was reported to be the only board member to vote against the restructuring plan, though Daimler insisted he had offered his "full support and agreement to the new structure" proposed by the parent company's board.
Analysts broadly welcomed the move. "There wasn't room for Werner and Schrempp in the one company. Schrempp had to get clear and undisputed control," said Peter Schmidt of Automotive Industry Data. "Werner is a very capable guy but he ran Mercedes as though it was his own company and an autonomous group and this just is not the case."
Mr Werner's departure, the latest in a series of top-level management changes at Daimler, draws a line under the German industrial conglomerate's ill-fated late-1980s attempt to diversify away from its core car business and build a national defence and aerospace champion on the back of Mercedes' commercial success.
Daimler has been on the road to recovery since reporting a massive DM5.7bn (pounds 2.13bn) loss in 1995 after massive provisions were taken at its DASA defence and aerospace division, which is part of the European Airbus consortium.
Mr Schrempp, who took over from Edzard Reuter two years ago, has cut back unprofitable businesses and exited from Fokker to help Daimler return to profit.