School president Rod Erickson announced the move Friday, a day after the school said McQueary would not be present when the Nittany Lions play Nebraska on Saturday because he has received threats.
McQueary testified in a grand jury investigation that eventually led to child sex-abuse charges being filed against former Penn State defensive coordinator Jerry Sandusky. The ensuing scandal brought down longtime coach Joe Paterno, who was fired by university trustees amid growing criticism that he should have done more to stop the alleged abuse.
McQueary, who testified that he saw Sandusky sodomizing a boy in the shower in 2002, has endured similar scrutiny. The university's athletic department released a one-line statement Thursday night saying it would be "in the best interest of all" if the receivers coach didn't attend the season's final home game at Beaver Stadium. The school did not provide details on precisely who threatened McQueary.
"It became clear that coach McQueary could not function in this role under these circumstances," Erickson said Friday, adding McQueary was told of the decision Friday afternoon.
Besides Paterno, school president Graham Spanier also has been fired.
Athletic director Tim Curley and vice president Gary Schultz have each been charged with perjury and failing to report an incident of abuse in 2002 to authorities. Curley has taken administrative leave, while Schultz - who was already working on an interim capacity - has returned to retirement.
Paterno has not been implicated, and prosecutors have said he is not a target of the investigation. Curley and Schultz, through their attorneys, have denied wrongdoing.
The campus leaders faced mounting public criticism for failing to call police and prevent further suspected cases. So, too, has McQueary, who has not spoken publicly. His mother, Anne, said Thursday they have been advised not to comment.
Described in court papers as distraught about witnessing the 2002 attack, separate newspaper accounts from the time indicate McQueary appeared in the months and years that followed in charity events that Sandusky also took part in, or were to benefit Sandusky's group The Second Mile.
Asked if McQueary would be fired, Erickson said "there are complexities to that issue that I am not prepared to go into at this point."
In forums online, and in comments on other websites, some have indeed called for McQueary to be ousted, but the assistant coach could be protected as a whistleblower.
Gerald J. Williams, a partner at a Philadelphia law firm, said Pennsylvania law is broad in protecting a person who reports wrongdoing, as long as that person is part of a governmental or quasi-governmental institution, such as Penn State.
Asked if McQueary was protected by whistleblower status, trustee Boyd Wolff said Friday after a board meeting, "He's a witness. He's different from the others, so he has to be treated differently."
As an emeritus trustee, Wolff is a non-voting member, though he said he took part in deliberations this week.
According to Williams, such whistleblower protections could include any kind of adverse employment action - such as being fired, demoted, ostracized or punished - although a court, ultimately, would determine whether the person is protected if they bring a claim.
The penalty on an employer can include monetary damages, attorneys' fees and reinstatement of the employee, he said.
According to the grand jury report, McQueary "reported what he had seen" to Paterno the next day, and Paterno then spoke to Curley.
McQueary was also called to a separate meeting with Curley and Schultz. Schultz, in turn, notified university president Graham Spanier.
Curley and Schultz - as well as Paterno - testified they were told that Sandusky behaved inappropriately in that 2002 incident, but not to the extent of McQueary's graphic account to the grand jury.
Sandusky was arrested and charged last Saturday. His lawyer maintains his client is innocent.
A Penn State graduate and State College native, McQueary also played for Paterno. He was the starting quarterback of the 1997 team that finished 9-3. McQueary joined the staff as a graduate assistant in 2000 - the season after Sandusky retired - and moved on to become receivers coach and recruiting coordinator in 2004.
McQueary has relayed the offensive play calls from the press box on the field. Graduate assistant coach Terrell Golden is expected to assume McQueary's sideline duties against Nebraska.
Regardless of what university administrators do, the outcome of the search for a new coach could affect McQueary's future at Penn State. In college football, when a coach is hired from outside a university, he frequently brings along his own set of assistants who replace the current group.
AP National Writer Nancy Armour in State College contributed to this report.