Peter Moores, last year's vice-captain, has been given the job and Wells, at the age of 35, has been left to consider his future at Hove with two years of his contract still to run.
The change would have stunned the county's members after a season most notable for the failed drugs test and consequent sacking of Ed Giddins, Sussex's England A fast bowler. Recent reports had circulated that Wells had been re-appointed for next year, but these turned out to be untrue.
Wells discovered he had lost the captaincy when he returned from his benefit tour of Barbados on Monday. He captained the side for five years, during which Sussex's results remained moderate and rumours of dressing-room unrest strengthened.
Desmond Haynes, the former West Indies batsman, took over as coach at the start of the season in place of Norman Gifford, who was sacked in July, 1995.
Three of the county's best players indicated they wanted to leave Hove during the summer - Ian Salisbury, the England legspinner, Martin Speight and Danny Law.
The timing of Wells's sacking - or non-reappointment coincided with today's Test and County Cricket Board threshold date, after which clubs are permitted to make official approaches to sign players from rival counties.
Sussex did not elaborate on the Wells decision; whether their hope was to hold on to their disaffected players by sacrificing their leader, or not, remained as speculation yesterday.
An official statement paid tribute to Wells's ``extremely valuable contribution''. It added: ``The club had a very frustrating season in 1996 and the committee are hopeful that a new captain will revive the team's spirit in 1997.''
It is unusual for anyone to relinquish a county captaincy unwillingly and continue solely as a player and, if Wells were to be released, there would be a scramble of counties seeking his signature.
Wells, England A captain in India two winters ago, made his single Test appearance in 1995 and remains one of the best batsmen in England.
He said yesterday: ``It may well be that for me to continue at Sussex could be a bit awkward for the new captain, but I will not rush into any decision about my future.
``I have been with Sussex for 18 years and it would be a wrench if I have to leave. But, if it is best for the county, I will move on and find another club.''
Sussex reached the final of the NatWest Trophy in 1993, but they have achieved no success since winning the competition 10 years ago. Last summer they finished 12th in the championship.
Wells said the county had handled the captaincy change in a ``disrespectful'' way and he added: ``If the matter had been discussed with me and my views sought, I would have been prepared to resign if it would mean us having more success.''