Jones, 27, is the first champion in UFC history to be stripped of a title due to disciplinary reasons. UFC officials also announced Tuesday that the promotion has indefinitely suspended Jones and pulled him from a scheduled title defense against Anthony Johnson at UFC 187 on May 23 in Las Vegas.
In addition, Reebok terminated Jones' endorsement contract, effective immediately, Wednesday morning. Jones had lost his deal with Nike after a mutual split in September 2014.
Former title contender Daniel Cormier will replace Jones in the pay-per-view event at the MGM Grand Garden Arena to fight for the now-vacant light heavyweight title.
"He's very disappointed. He's upset. He wanted to go down as one of the greats or the greatest," UFC president Dana White said on "Fox Sports Live" of Jones. "He's disappointed, but it is what it is. It is the decision we had to make.
"For us to go in and have to strip him of his title and suspend him is not fun, but you know what they say: The show must go on."
Johnson echoed those sentiments to ESPN.com on Wednesday.
"I can say that I'm kind of disappointed with the mistake Jon made, but he is human," Johnson said. "I definitely wanted to fight him for the title. He's the best. Everybody wants to fight the best, if you're in this sport for the right reasons."
Jones appeared in Bernalillo County Metropolitan Court on Tuesday for a felony first appearance. Judge Maria Dominguez granted a request made by Jones' attorney, Vincent Ward, to remove any travel restrictions on the fighter, which kept alive the possibility of Jones fighting next month in Las Vegas.
UFC CEO Lorenzo Fertitta, UFC chief operating officer Lawrence Epstein and White flew to Albuquerque to meet with Jones and his representatives Tuesday afternoon. UFC announced Jones had been stripped of the title hours later.
"UFC feels strongly that its athletes must uphold certain standards both in and out of the Octagon," UFC said in a statement. "While there is disappointment in the recent changes, the organization remains supportive of Jones as he works through the legal process."
Widely considered the best pound-for-pound fighter in the world, Jones allegedly was involved in a three-car accident Sunday morning. Witnesses said a man fitting Jones' description ran a red light, collided with another vehicle and fled on foot. According to police reports, the man apparently returned to the vehicle to grab a "large handful of cash" before fleeing a second time.
The driver of the car that was struck, a 25-year-old pregnant woman, was taken to the hospital. Police confirmed she suffered a fractured arm and wrist.
Jones did not enter a plea during his court appearance Tuesday. The district attorney has 60 days to determine whether to move forward with the case, according to court spokeswoman Camille Cordova.
After the court hearing, Jones tweeted for the first time since the accident.
In May 2012, Jones was arrested on suspicion of driving under the influence after he crashed his Bentley into a telephone pole in Binghamton, New York. Jones pleaded guilty to a misdemeanor DWI charge and avoided jail time.
In early December, Jones tested positive for metabolites of cocaine while training for his bout against Cormier. Jones was allowed to compete because the test was conducted out of competition and beat Cormier via unanimous decision.
When the failed drug test became public after the fight, Jones publicly apologized for a "mistake." He admitted himself to a drug treatment center for one day and underwent outpatient therapy.
Jones had defended the 205-pound title a record eight times since becoming the youngest champion in UFC history in March 2011. He was two defenses away from tying former middleweight champion Anderson Silva's record of 10 consecutive title defenses at any weight division.
Cormier (15-1) will fight for the light heavyweight championship despite coming off a loss in his previous bout. The former U.S. Olympic wrestler challenged Jones for the title at UFC 182 on Jan. 3 in Las Vegas and lost via unanimous decision. Cormier is 4-1 overall in the UFC with two finishes.
"I can't be too disappointed. I have a title fight and a worthy opponent in Daniel Cormier," Johnson told ESPN.com. "I'm happy I get to fight someone like him."
Johnson (19-4) is 3-0 in the UFC light heavyweight division. He fought for the promotion from 2007 to 2012, primarily as a welterweight. The UFC released Johnson in early 2012 for repeatedly missing weight. Fighting out of Boca Raton, Florida, Johnson is on a nine-fight win streak.
The Associated Press contributed to this report.