Apple spokesman Steve Dowling confirmed Papermaster's exit and said Bob Mansfield is assuming his responsibilities. Dowling declined to provide a reason for the departure of the former IBM senior executive.
The news was first reported by the New York Times.
Apple released the iPhone 4 in June and it was an instant hit with consumers. But reports spread about bad reception when the device was held a certain way, and analysts warned that the company's reputation for quality was under threat.
The issue snowballed into a publicity crisis and Apple was forced to call a press conference to tackle the matter. Apple CEO Steve Jobs maintained there was nothing wrong with the iPhone 4, and that the reception problem was one shared by other smartphones.
Papermaster was not at the press conference on July 16. Mansfield, who will take over for him, now oversees Macintosh hardware engineering.
"Mr. Mansfield already manages groups that create many of the key technologies for the iPhone and iPod touch, including the A4 chip, Retina display and touch screens," Dowling said.
Apple hired Papermaster in November of 2008, luring him away from IBM, where he had worked for 25 years.
IBM sued Papermaster after his departure, saying he agreed to avoid working for any competitor for a year.
A federal court initially barred Papermaster from working for Apple, but the lawsuit was eventually resolved and he began work for Apple in April of 2009.