Chad Dickerson, who was also chairman, will be replaced by former eBay executive Josh Silverman.
Etsy made an unexpected loss of $421,000 (Â£325,000) in the first three months of 2017 - having earned $1.2m a year earlier.
It also announced it was cutting 80 jobs - or about 8% of its workforce.
Etsy shares fell 17% in after-hours US trade after the announcements.
The e-commerce site said it had sales of $96.9m in the three months to March, an 18% increase from the year before. However that still came in below analyst estimates.
Etsy listed on the Nasdaq in 2015 after becoming known as the eBay for artisanal and handcrafted items.
But it has come under investor pressure to restructure with one of its shareholders, Black-and-White Capital, this week saying the firm needs to explore a sale.
The chief executive of online crafts marketplace Etsy has resigned after the firm reported poor earnings.