The US government denied that its diplomat had been involved in espionage.
"This expulsion is not justified. None of the military attaches at the US embassy in Caracas was or is involved in inappropriate activities," said Julie Reside, a State Department spokeswoman.
President Chavez identified the expelled attache as Commander John Correa.
"John Correa has to leave the country immediately," President Chavez, a virulent critic of the United States, said in a speech at a Caracas theatre to mark the seventh anniversary of his coming to power.
"We have decided, in diplomatic terms, to declare him persona non grata, in plain Spanish that means to throw out of the country an officer at the US military mission for spying," he said.
The socialist president, a virulent critic of the United States, warned if other military attaches were caught spying they could be detained.
President Chavez accused Commander Correa of buying information on the Venezuelan armed forces and of setting the stage for a "Panama-type operation."
US forces invaded Panama in 1989 to arrest strongman Manuel Noriega and try him in Miami on drug charges.
"If they think about coming to get me, then come, we are waiting for you," President Chavez said.
In Washington, a Defence Department spokesman, Lieutenant Colonel Mark Ballesteros, said the officer "has been rotated back to the US mainland for further duties as assigned."
President Chavez earlier revealed that Venezuelan authorities had infiltrated a group of military officers from the US embassy who he alleged had been spying on his government.
Officials have said the network included some Venezuelan navy officers who were accused of passing sensitive information to Washington.
The Bush administration claims President Chavez, is destabilizing the region. It recently prevented Spain from selling military planes with US parts to Venezuela.
US officials regularly express concern about President Chavez’s influence in Latin America, in particular his alliance with Cuba's communist leader Fidel Castro.