Head coach Clay Helton made the decision after conferring with offensive coordinator Graham Harrell, per Antonio Morales of The Athletic.
Kedon Slovis will be the team's No. 2 quarterback, followed by Matt Fink and Jack Sears.
Daniels started last season as a true freshman after coming in as a 5-star recruit and the No. 2 quarterback in the nation, per 247Sports.
He struggled at times in the role while finishing with just 14 touchdowns and 10 interceptions in 11 games, ranking 56th in the country in Total QBR. The team was 5-6 in games he played in 2018.
Despite the modest numbers, he showed flashes of great play, including 349 passing yards in the season finale against Notre Dame.
Still, he had to earn back his job in a full quarterback competition this offseason, which featured returning players Fink and Sears as well as unheralded freshman Slovis. Few were expecting Slovis to get a fair shake as true freshman and just a 3-star recruit, but he turned heads in camp.
Harrell praised the youngster earlier this month, via Morales:
"Kedon's a special talent. He just turned 18 this summer so he's a young kid, had room to grow and did grow. ... He can make some throws a lot of people can't make. He did a great job all summer, coming in, watching film, trying to get as many reps as he could get without being on the field. He maximized his summer that way. When that ball comes out of his hand, it looks different. And that's what it's supposed to look like."
It was enough to move up the depth chart ahead of the more veteran players.
If Daniels fails to live up to expectations in 2019, the other quarterbacks might get a chance before too long.