The move marks the latest upset in the upper echelons of one of Africa's biggest banks following the departure of CEO Daniel Mminele earlier this year in a strategy dispute after just 15 months on the job.
Absa, which had already removed Pityana from key board positions earlier this month, dismissed him as a director on Wednesday, saying his actions after his unsuccessful attempt to become chair had created "a sustained and irresoluble conflict".
Pityana, once lead independent director and chair of Absa's remuneration committee, filed documents at South Africa's High Court in late October arguing the Prudential Authority (PA), which approves key appointments at the country's banks, objected to his nomination for chairman informally and without following proper procedure, thwarting his application while denying him the chance to defend himself.
According to court documents filed in response by Absa, Pityana was one of two short-listed candidates for the role, but was ultimately unsuccessful due to concerns around his departure as chairman of miner AngloGold Ashanti following a sexual misconduct investigation.
The documents, which detail discussions between Pityana and the Absa board chair around his application, show Pityana has maintained that sexual misconduct allegations are false and he disputes findings that he acted inappropriately.
Kubeen Naidoo, head of the PA, also raised concerns about the matter and its potential impact on Absa during initial conversations with the bank over its nominees, according to documents submitted to the court by the regulator.
In a six-page statement released on Wednesday, Pityana said he had instructed his legal team to take Absa's decision to court for review. He added that although he had never alleged Absa had acted unlawfully, he was nevertheless being punished by the bank for exercising his rights to the courts.
The PA denied that it thwarted his nomination in its court documents, arguing that Absa decided not to pursue this itself and that its initial requests for guidance from the PA were routine and not unlawful.
Absa said on Wednesday that while it respected Pityana's right to administrative fairness, his pursuit of personal interests had come at the expense of the group and he had therefore been removed.
External candidate Sello Moloko was appointed chairman in October.
(Reporting by Emma Rumney; Editing by Kirsten Donovan)