Wagner, 52, was sent packing during the TV show's "most-memorable year" themed week in which the dancers selected a particular year for inspiration.
The actor, who was partnered with professional ballroom dancer Anna Trebunskaya, chose 2011 as his most memorable when he discovered he had a daughter.
Wagner looked surprised to be eliminated but said "I had a great time, and it was kind of great to test myself."
He could take solace in comments from judge Len Goodman, who said of Wagner's performance on Monday night's program: "For me, your best dance yet."
The judges praised all the dancers this week, and Goodman went so far as to say they all performed so well that "no one deserves to go home tonight."
The dancers' scores were clustered together after Monday's performance show with only five points separating the first-place dancers from the lowest scorers.
Five dancers, including Wagner, were tied at the bottom with 24. The other two dancers who faced elimination were singer Gladys Knight and musician Gavin DeGraw, who came in second-to-last for the second straight week.
Viewer votes combined with judges' ratings decide which star is eliminated each week.
But host Tom Bergeron on Tuesday unveiled a new twist in the popular TV contest. In coming weeks, the bottom-two couples will have a dance-off with the judges deciding who goes home based on their last-chance dance.
The top score from the judges' ratings after Monday's show was again won by singer Katherine Jenkins. Ten stars remain in the competition.
Musical highlights of the Tuesday's live elimination round included Seal performing "Lean on Me," and country group Rascal Flatts doing the title track from their latest album, "Changed."
"Dancing With the Stars" annually is among the top-rated U.S. TV shows with a formula that pairs B-list celebrities, sports stars and singers with professional dancers performing sambas, waltzes and other dances across a ballroom floor.
(Reporting by Chris Michaud; Editing by Bob Tourtellotte)