Kelly was benched for the second half of Saturday's spring game after a confrontation on the field with two members of the Clemson staff. He completed 10-of-18 passes for 113 yards and two interceptions before being benched.
"I have dismissed Chad Kelly for conduct detrimental to our program," Clemson coach Dabo Swinney said in a statement. "He has had a pattern of behavior that is not consistent with the values of our program. I hope he will mature and grow from this and become the man and player I know he can be. I wish him nothing but the best in the future academically and athletically."
Kelly, a redshirt sophomore, was competing with senior Cole Stoudt and freshman Deshaun Watson for the opportunity to replace Tajh Boyd as the starter for the 2014 season.
Kelly redshirted the 2012 season, then suffered a torn ACL in the 2013 spring game. He came back to play Sept. 7 against S.C. State and appeared in five games overall, completing 10-of-17 passes for 58 yards and rushing 16 times for 117 yards and a touchdown.