An IP address (in this example, 203.0.113.2) is set as public for a private IP address and added as a separate IP address at Tools & Settings > IP Addresses.
When removing the separate IP address, the operation fails with:
Error: IP address 203.0.113.2 cannot be removed because it is used by DNS zone of one or more domains
The IP address is used as public for the private IP address which has a website hosted on it.
Apply one of the following solutions:
Note: Make sure that the IP address you are going to remove is not used by any domain at Tools & Settings > IP Addresses.