Lego's chairman Jorgen Vig Knudstorp said the decision was not a reflection of Mr Padda's performance, but because he was not able to have a long tenure.
His role will be taken over by 51-year-old Niels Christiansen, former chief executive of Danish industrial group Danfoss.
Mr Padda, who was only appointed in December as part of a wide-ranging management shake-up, will retain a role at the firm as a special adviser.
Christiansen will take over as CEO on October 1.
Toy-maker LEGO named a new CEO Thursday for the second time in eight months, the company announced.
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"The DPRK must choose to stop isolating itself and stand down its pursuit of nuclear weapons", he explained in an official statement.
"He is a great friend and a wonderful ambassador for the LEGO brand".
During his time at Danfoss, Christiansen was credited with giving the global company a larger digital focus.
Padda, a 61-year-old India-born Brit and Lego's former chief operations officer, was only considered a temporary CEO. Knudstorp describes Christiansen as "one of the strongest CEOs of his generation" and states that he is "confident that under Niels, the LEGO Group will continue to flourish and bring play experiences to more children around the world".
He said he is "honoured to have the opportunity to join an organisation as iconic and purpose-driven as the LEGO Group".
Lego, a competitor to Mattel, has been focusing on manufacturing of colorful plastic internet locking bricks and minifigures.