President Vladimir Putin sacked Prime Minister Mikhail Kasyanov and his Cabinet today, the presidential press service said.
There was no immediate reason given for the dismissal, but speculation that Mr Kasyanov was on the way out had rife for months.
Deputy Prime Minister Viktor Khristenko was named acting prime minister.
Mr Putin went on TV today to say he had sacked Mr Kasyanov and his cabinet in order to reshuffle the government ahead of the March 14th presidential elections.
The dismissal of the prime minister also means the dismissal of the rest of the government ministers, although any of them potentially could be reappointed.
Mr Kasyanov was the last major official left in the Kremlin from Mr Boris Yeltsin's years as president.
He served in the Soviet-era state planning agency Gosplan during the 1980s and after the Soviet collapse in 1991 began a steady rise through economic and financial posts.
As deputy finance minister in 1996 he worked out a deal for repaying debts that Russia inherited from the Soviet Union and two years later was a key figure in Russia's efforts to retain stability and credibility after Russia defaulted on foreign debt payments and the rouble's value plunged.
He became finance minister under Mr Yeltsin in 1999 and one of his main achievements in that post was persuading the Paris Club of creditors to reschedule more than billions of roubles in Soviet-era loans.
After Prime Minister Vladimir Putin became acting president upon Mr Yeltsin's resignation in December 1999, he appointed Mr Kasyanov first deputy prime minister, effectively making him Russia's number two official.
After Mr Putin was elected president in the spring of 2000, he appointed Mr Kasyanov prime minister.
AP