The 67-year-old is suspended after his arrest on July 18 on suspicion of falsifying documents, misappropriation of funds, collusion and administrative breaches linked to skimming profits from international friendly games.
He spent two weeks in custody before his release on bail.
In a statement the RFEF said its executive committee had told Villar “to resign”.
Following his arrest Villar was suspended as RFEF president for a year, and he resigned as vice-president of both FIFA and UEFA.
Villar has headed the Spanish federation for the past 29 years and under his watch Spain became one of the dominant forces in world football, winning two European championships and the 2010 World Cup.
But his critics say his period in charge was marked by ethical issues and an autocratic management style.
Villar denies all charges against him.
Also detained in a series of dawn raids in July were his son Gorka, the Spanish federation’s financial vice-president Juan Padron and Ramon Hernandez Baussou, general secretary of the Tenerife federation.
The federation’s treasurer Juan Luis Larrea has acted as RFEF acting president since Villar’s arrest.
Would you like to place a soccer bet? Click here to get started in 3 easy steps.