Remove licenses from users in Office 365 for business
In the Admin center, go to the Active users page, or choose Users > Active users.
If you're using Office 365 Germany, go to this Active users page.
If you're using Office 365 operated by 21Vianet, go to this Active users page.
Select the user that you want to remove the license from.
On the right, in the Product licenses row, choose Edit.
In the Product licenses pane, switch the toggle to the Off position for the license you want to remove from the user. For example, switching off Office 365 Enterprise E3 license will remove that license from the user and all of the services under that license.
At the bottom of the Product licenses pane, choose Save > Close > Close.
The user's product licenses pane showing the Office 365 Enterprise E3 license toggle.
What you need to know about removing licenses from users
You need to be either a Global admin or a User management admin. For more information, see About Office 365 admin roles.
You can also delete user accounts that have been assigned a license to make their license available to other users. When you delete a user account, their license is immediately available to be assigned to someone else.
When a user's license is removed, data that is associated with that user account is held for 30 days. After the 30 day grace period, the data is deleted and can't be recovered. Files that are saved in OneDrive or SharePoint Online are not deleted.
If you have an Enterprise subscription, like Office 365 Enterprise E3, Exchange Online lets you preserve the mailbox data of a deleted user account by using inactive mailboxes. For more information, see Manage inactive mailboxes in Exchange Online.
For information about how to block a user's access to Office 365 data after their license has been removed and how to get access to the data afterwards, see Remove a former employee.
If you remove a user's license and they still have Office installed, they'll see Unlicensed Product notifications when they use Office.