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How would I go about doing this? I can't find anything useful in the Xbox 360's wonderfully informative menus.

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up vote 8 down vote accepted

I'm not sure how to do this on the console, but I know that you can remove friends from xbox.com. Log in using the Windows Live ID associated with your GamerTag, and go to the Friends Center. There is a "Remove" button by each person on your Friends List that you can use to remove them.

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Nice, i accidently accepted a friend ages ago and when i'm streaming tv episodes from my mac, their name keeps popping up telling me they're online...i dont even know them! –  benhowdle89 Dec 1 '10 at 12:11
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Its also possible to suppress all log-in messages while you are watching a movie, this can be done through the system settings menu –  Aardvark Dec 1 '10 at 15:27
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When you select a friend's gamertag and the menu pops up ("Invite to Party", etc.), one of the options near the bottom is "Remove Friend":

Screenshot of Remove Friend option

(Source: http://support.xbox.com/xbox-live/social/chat-managing-friends)

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