Councillor Peter Nutting, who has led the Conservative administration on the authority since 2017, was beaten by the Lib Dem challenger for his Copthorne seat in Shrewsbury.
Councillor Nutting has been the figurehead for some of the authority's biggest decisions in recent years – with a former cabinet colleague suggesting that his support of the North West Relief Road could have cost him his job.
The vote saw Liberal Democrat Rob Wilson receive 995 votes to the Tory leader's 476.
Mr Nutting left the count venue prior to the result being declared but did tell the media it had been a privilege to represent Copthorne on Shrewsbury & Atcham and Shropshire Council.
Battlefield Councillor, Dean Carroll, who was selected for a cabinet post by Mr Nutting, said his former leader had paid the price for brave decisions.
He said: "He has never backed away from a brave decision that is good for the people of Shrewsbury. He was key to building the sports village, converting the old music hall, turning the old market hall into a fantastic cinema and cafe, building Theatre Severn. These are all things that have been done on his watch.
"He made a brave decision to press ahead with the North West Relief Road, knowing it was right for the people of Shrewsbury – and the whole central part of Shropshire.
"It is in the right interests of the people of Shrewsbury as a whole and that has cost him his seat and I really feel for him. He has delivered what we have been trying to do for decades and successive councils have failed to do.
"He has provided over 40 years service but it is democracy and it is the business we are all in, and sometimes when you make bold choices that are right for the future of the town, sometimes they can be unpopular."
The Labour Leader of Telford & Wrekin Council Councillor Shaun Davies also paid tribute to the former Shropshire leader, saying: "I worked closely with Peter Nutting, he is an honourable man."
Councillor Davies added that his council "stand ready to work constructively with the new leadership of Shropshire Council".
Attention will now turn to the leadership of the party and the council.
Deputy leader Councillor Steve Charmley will automatically become acting leader ahead of the group's AGM, expected to take place on May 17.
Speaking before the result Councillor Charmley said that he would throw his hat in the ring for the top job if Councillor Nutting was to lose his seat.