This is a move that may stir worker unrest and hurt the coalition that has ruled since apartheid ended in 1994.
After meeting through the night, delegates from the Congress of South African Trade Unions (COSATU) voted 33-24 in favour of expelling the National Union of Metalworkers of South Africa (NUMSA).
NUMSA, previously the biggest member of COSATU, has regularly criticised President Jacob Zuma's administration.
(READ MORE: S.Africa's Numsa union turns down 10% offer)
COSATU is in a three-way governing alliance with the ANC and the South African Communist party. The workers' federation is seen as a powerful vote-winning machine which also makes significant financial contributions for elections.
"We were expelled this morning, a predetermined decision was evident, the reasons for them kicking us out were not enough," NUMSA's treasurer Mphumzi Maqungo said.
"It was painful, it was as if someone had died," he said of the split in a 27-year relationship forged in the fight against racial oppression, which eventually brought down white minority rule in South Africa.
The expulsion has been on the cards for months after the union said last December it would not campaign for the ANC in the May general elections and accused Zuma's government of promoting business instead of workers' interests.
It also said it would form a political movement called the "United Front" to advance a socialist agenda.
NUMSA's expulsion is likely to add to labour unrest, analysts said. South Africa's economy, the continent's most developed, has been hamstrung by strikes this year, including a damaging five-month stoppage in the platinum sector.
"NUMSA expulsion will drive labour instability and make upcoming public sector wage negotiations more difficult," said Eurasia Group Africa Director Mark Rosenberg.
"Public sector union leaders have backed the ANC. They expect to be rewarded for their loyalty and will need to counter NUMSA accusations that COSATU is merely a labour desk of the ANC," Rosenberg added.
(READ MORE: Political tensions could slow Africa’s growth)
In a last ditch attempt to stave off expulsion, NUMSA's general secretary Irvin Jim told COSATU's top leaders on Friday that the federation that once struck fear into South Africa's apartheid-era bosses was now in a state of "paralysis".
Jim said COSATU wanted to expel NUMSA because it had spoken out against rising levels of corruption and "political bankruptcy" in the ANC under Zuma. Most of NUMSA's members are black workers in key sectors such as car manufacturing.