Finance Minister Charles Sousa said in a statement that he delivered the news to Godfrey during a a meeting.
Sousa's statement gave no reason for Godfrey's dismissal. Godfrey told a news conference he asked for a reason but wasn't given one, adding that Premier Kathleen Wynne told him the government was "going in a different direction."
Godfrey speculated that it came down to personalities, and wishes that's what Wynne would have told him.
"I honestly believe that the chemistry between Kathleen Wynne and Paul Godfrey just weren’t on the same plain," Godfrey said. "Some people you connect with some people you don’t. That would have been enough of an answer for me."
Godfrey said he believes things started unravelling when he recommended Toronto be given a larger share of the take if a casino was located in the city.
He says that should not have been a surprise because Toronto gets special treatment in other areas.
But Wynne was opposed to that proposal and wanted all municipalities to be treated equally.
Godfrey said he didn't believe his dismissal had anything to do with Toronto Mayor Rob Ford's announcement Thursday that he had cancelled a special council meeting to consider the casino proposal. Ford said he couldn't get a firm commitment from the province about how much the city would receive from a casino.
He said everything that was done at OLG while he was chairman was taken to the government for approval.
In his statement, Sousa commended Godfrey for his work.
“Mr. Godfrey led a significant turnaround in the operations of the OLG. Under his leadership, OLG re-invented itself and became a modern and more efficient organization," the statement said. "OLG undertook a strategic business review of its entire operations that brought greater focus and discipline to this important public agency."
The Progressive Conservative Opposition called the Godfrey ouster and the handling of the proposal to set up casinos a "shocking example of Liberal government mismanagement."
"What we do need is to disengage government from the daily business of gambling," Tory MPP Monte McNaughton said in a statement.
"It is time for the government to become the responsible, respected and tough regulator and not the operator trying to bully communities into accepting new casinos.”
The NDP said it hoped Godfrey's firing means the Liberal government is rethinking its casino plans and its decision to close slot machines at race tracks.
"The Liberals appointed Paul Godfrey to privatize gaming and build casinos in communities that don't want them," NDP finance critic Michael Prue said in a statement.
"The plan backfired and now they're throwing him overboard. Hopefully, this means the Liberals are also rethinking their shortsighted private casino scheme that has devastated the horse racing industry."
Godfrey has been chairman of OLG since February 2010.
The secretary of the cabinet, Peter Wallace, takes over as interim chairman.