How do I remove a project reference from a website project in Visual Studio?

The reference is stored in the Visual Studio solution file.

Right-click on the web site's project item in Solution Explorer and choose "Property Pages". The first item on the dialog that comes up is "References". You can add/remove references from here.

Edit:

I should mention that this is in Visual Studio 2010. I don't have any other versions installed at the moment, so I can't verify that this works for them as well.

There's a bug in all versions of Visual Studio 2005-2010 that make you think you are deleting a project reference, but when you try to add the reference back, it says it already exists. Solution: delete the solution file (SLN) and re-add all the projects back. This is the ONLY solution that works unless you can edit the solution file directly (which almost never works).

Here's how I did it for Visual Studio 2017.

1. Close the solution in Visual Studio
2. Open the solution file (.sln) in a text editor
3. Locate the website project: Project("{E24C65DC-7377-472B-9ABA-BC803B73C61A}") = "YOUR-WEBSITE-NAME"
4. Locate the ProjectReferences property under the project
5. The reference you want to delete might look like {03D389EB-38E0-4D71-86EF-E2ABCFB4AE21}|REFERENCE-TO-REMOVE.dll;
6. Delete it from within the string, including the semicolon

In VS 2013, there is no direct option, you have to delete all dlls in bin/debug , and clean, re build solution, you are done.