Mohammed al-Makdishi, a major general, was sacked from his command in the northern city of Amran.
Hadi also sacked Mohammed al-Somali, a brigadier-general who commanded the southeastern Hadramawt province, where al-Qaeda fighters are active.
The capture of Amran by Houthis, just 50km north of Sanaa, threatened a federalisation plan that was agreed in February following national talks as part of a political transition.
Houthi rebels agreed to pull out from the city on Saturday after striking a deal with the defence ministry allowing troops back into Amran, AFP reported.