Morales' announcement came hours after his government said a pipeline blast triggered by saboteurs forced the country to cut natural gas exports to Brazil by 10 percent.
"Without fear of the empire, I declare the U.S. ambassador 'persona non grata,"' Morales said in a speech at the presidential palace. He said he asked his foreign minister to send a diplomatic note to Ambassador Philip Goldberg telling the American to go home.
"We don't want separatists, divisionists," Bolivia's leftist president added.
In Washington, U.S. State Department spokesman Gordon Duguid called the accusation "baseless" and said the U.S. government had not yet received a note about the ambassador.
The U.S. Embassy in Bolivia said on its Web site that Goldberg learned of Morales' action during a meeting with Bolivia's foreign minister. The statement said he was surprised at Morales' "sudden decision" and was waiting for official diplomatic notification.
Morales' close ally President Hugo Chavez of Venezuela, who also calls the United States "the empire," cheered the move, calling a two-week wave of increasingly violent anti-Morales protests the harvest of an alliance between Bolivia's "extreme right" and the U.S. government.
The Bolivian leader did not offer specific evidence against Goldberg, but he has long accused the diplomat of conspiring with Bolivia's conservative opposition. A share of U.S. aid to Bolivia goes to eastern provincial governments that are the nexus of opposition to Morales, which has angered the Bolivian president and his supporters.
Morales, meanwhile, praised protesters who marched on the U.S. embassy in May and has accused Washington of plotting to overthrow him.
In June, his government terminated USAID programs in the coca-growing Chapare region aimed at weaning farmers off the crop from which cocaine is produced. Farmers there had faulted the programs as heavy-handed and ineffectual.
Goldberg met last week with Ruben Costas, one of Morales' most virulent opponents. Costas is governor of Santa Cruz, Bolivia's richest province and the seat of a pro-autonomy revolt against the nation's first indigenous president.
Anti-Morales protests reached a crescendo on Tuesday with the sacking and burning of government offices in Santa Cruz in which at least 10 people were reported injured.
Anti-government activists also seized several natural gas installations in the east.
At one, in the eastern province of Tarija, demonstrators triggered Wednesday's pipeline blast by closing a valve, creating pressure that ruptured the line near the border with Paraguay and set off a fire, the government said.
No injuries were reported in what state energy company president Santos Ramirez called "a terrorist attack."
The government immediately ordered additional troops to Bolivia's rebellious eastern provinces to secure gas and oil installations. Ramirez said both gas plants remained occupied by protesters on Wednesday afternoon.
The pipeline blast reduced by 3 million cubic meters the 30 million of gas Bolivia sends Brazil each day, he said. But in Brazil, officials said the gas flow remained normal.
Brazil's ambassador to Bolivia, Frederico Araujo, was quoted by the government's official news service as saying Brazil would not be affected for 48 hours.
"They damaged only one valve, they didn't explode the pipeline like it's been said in the news," Agencia Brasil quoted him as saying. Bolivia supplies neighboring Brazil with 50 percent of its natural gas, used for power generation and as fuel for cars and cooking.
Ramirez said it would take 15 to 20 days to repair the pipeline at a cost of US$100 million. He said Bolivia would lose US$8 million a day in revenues.
Morales' opponents in the east are seeking a greater share of revenues from natural gas - Bolivia's chief export - for the richer lowland provinces, home to the bulk of its gas fields.
Morales has devoted much of those revenues to programs that benefit the poor and elderly. He has called the protests a "civil coup."
Opposition leader Branko Marinkovic, the owner of large land holdings in soy-growing Santa Cruz, said Tuesday that the only way out of the conflict is for the government to cancel a Dec. 7 referendum on a new constitution.
The proposed new constitution, which would give indigenous groups greater control of their traditional lands and make it easier for the government to redistribute fallow land, was approved by a special assembly last year amid an opposition boycott.