In a statement, Volkswagen said Hohmann-Dennhardt was leaving "due to differences in their understanding of responsibilities and future operating structures within the function she leads".
The 66-year-old joined VW's board of management last January, when the company was reeling from its admission that it had installed cheating software in some 11 million diesel engines worldwide that made the cars seem less polluting than they were.
Germany's Sueddeutsche Zeitung called her departure "a major setback" for Volkswagen as it seeks to win back customers' trust and turn the page on the crisis.
Citing company sources, the newspaper said Hohmann-Dennhardt had run into opposition over her efforts to shed light on how the emissions scam unfolded, clashing with top brass eager to draw a line under the saga.
Volkswagen earlier this month pleaded guilty to criminal charges over the pollution fraud, and has so far agreed to pay out more than USD 20 billion in fines and compensation to authorities, dealers and drivers in the United States.
In its statement, Volkswagen thanked Hohmann-Dennhardt for her "outstanding expertise" and said the company would "continue to press forward with changes to its way of thinking and working".
The former judge will formally step down on January 31, it added.
She will be replaced by VW's head of auditing, Hiltrud Werner.
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