Badjie has been replaced by General Masanneh Kinteh, a former ambassador to Cuba and a special military adviser to Barrow since January.
As he took over from Badjie, Kinteh told reporters at defence headquarters in Banjul: "My immediate priority as chief of defence staff is to bring back the confidence in the troops to lift their morale."
He added that he wanted to boost civil-military relations, which have "eroded over the period as a result of the political impasse".
An army source told AFP that Badjie, who is set to be posted abroad, had handed over his official car and documents.
Barrow retook his oath of office on February 18, a month after he was sworn in across the border in neighbouring Senegal during a tense power struggle with his predecessor Yahya Jammeh.
Barrow told the crowd at the swearing-in he would probe human rights abuses under Jammeh's iron-fisted rule spanning 22 years.
"A Human Rights Commission will be established without delay" to track people who went missing or disappeared after being arrested, Barrow said.
"Orders have already been given for all those detained without trial to be released."
The United Nations and rights groups repeatedly condemned The Gambia's security services under Jammeh, blaming them for arbitrary detentions, extrajudicial killings and torture.
Last week Barrow removed the chief of the country's feared intelligence agency, Yankuba Badjie, and the head of the national prison system, David Colley.
Ousman Badjie, a Jammeh loyalist, had pledged allegiance to Barrow along with top defence, civil service and security chiefs on January 20, one day before the former president fled the country.
The general was also spotted among revellers on the streets of Banjul celebrating Barrow's inauguration in Senegal.
Kinteh was first named as armed forces chief in October 2009 following the removal and arrest of his predecessor, General Lang Tombong Tamba.
He was subsequently dismissed in July 2012 and appointed Gambia's ambassador to Cuba, and replaced by Badjie.
Amnesty International said that under Jammeh, "Gambia's climate of fear was sustained for years through regular arbitrary arrests and detention, as well as routine torture".
Since effectively taking power late last month, Barrow has rushed to uphold pledges to overhaul the military and security services.