Ties have become increasingly frayed since December 12 when Indian consulate worker Devyani Khobragade was arrested in New York for alleged visa fraud and making false statements relating to the employment of a domestic servant.
India asked the US to withdraw an embassy official earlier Friday in a fresh retaliatory measure, just as the row over the arrest appeared to have cooled.
"We deeply regret that the Indian government felt it was necessary to expel one of our diplomatic personnel," US State Department spokeswoman, Jen Psaki, said on Friday.
She confirmed that the official, who has not been identified, would be leaving the post at India's request.
"We're looking to move our relationship forward. We're looking to move past this challenging time, and we hope they'll be a partner in that," she said.
Khobragade was charged in a New York court on Thursday, but was granted full diplomatic immunity by Washington shortly beforehand, which allowed her to return home. She arrived back in New Delhi on Friday.
Psaki said that the charges remained in place, and that her diplomatic immunity expired on returning to India.
Khobragade will not be allowed to return to the US unless she surrenders to the court on arrival, and her name is being placed on American visa and immigration watch lists "to prevent the routine issuance of any future visa", Psaki added.
It was also possible that a warrant could be issued for her arrest now she has left the United States.
Khobragade's lawyer Dan Arshack told AFP that she was pleased to be returning to India.
"Her head is held high. She knows she has done no wrong and she looks forward to assuring that the truth is known," he said.
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