Ahead of the launch of Yeddyurappa's Karnataka Janata Party (KJP), state BJP also suspended his staunch supporter and Tumkur MP GS Basavaraj from the party and issued show cause notices to both Mr Puttaswamy and Mr Basavaraj.
"As a disciplinary measure, Mr Puttaswamy has been dropped from the cabinet. He participated in so many meetings of the new party and campaigned for the new party. So, it is indiscipline in the party's view. Have already sent the letter to the Governor to drop him from the cabinet," Mr Shettar told reporters.
Party state unit President and Deputy Chief Minister Easwarappa announced the decision to suspend Mr Basavaraj from the party.
"In Karnataka, we are giving importance to discipline. One Lok Sabha member from Tumkur, Basavaraj... he is violating the party discipline. We all the core leaders from Karnataka sat with the national leaders and we have taken the decision to suspend Mr Basavaraj," Mr Easwarappa said.
The decision came a day after about 23 legislators and 7 ministers attended the breakfast meet hosted by Mr Yeddyurappa, who quit BJP recently, in solidarity with him.
Ministers CM Udasi, Murugesh Nirani, MP Renukacharya, V Somanna, BJ Puttaswamy, Shobha Karandlaje and Umesh Katti and about two dozen legislators were present at the meeting held at Belgaum.
Mr Shettar and Mr Easwarappa, who met senior BJP leaders including President Nitin Gadkari, also warned of strong action against Mr Yeddyurappa's other loyalists. Former Chief Minister DV Sadananda Gowda and party's national leader Ananth Kumar were also present in the meeting.
"Anybody wants to go to KJP.... Yeddyurappaji has taken the decision. He has already given resignation from BJP and also from the state legislature. His followers also should do the same thing. Otherwise, we will take the disciplinary action," he said.
Mr Yeddyurappa, who is all set to launch his new party, Karnataka Janata Party at Haveri on Sunday, has claimed the support of 30 BJP legislators and ministers. (Read: BJP to keenly watch Yeddyurappa's Sunday show)
In Bangalore, a Raj Bhavan communique said Governor HR Bhardwaj accepted the recommendation of Mr Shettar to drop Mr Puttaswamy from the ministry. The Chief Minister in a letter requested the Governor to drop Mr Puttaswamy with immediate effect.