China has removed Bo Xilai from his post as Chongqing's Communist Party leader, state media Xinhua news reports.
The 62-year-old was a strong contender for promotion to China's top rungs when the party changes its leadership later this year.
However, a scandal erupted when his former chief of police spent a day at a United States consulate last month.
Vice Premier Zhang Dejiang will replace Mr Bo, said the Xinhua report.
The move comes just a day after the end of the country's annual parliamentary session, the National People's Congress (NPC), when Mr Bo's absence from a meeting sparked speculations about his future.
After a long silence, he spoke last week about the incident with ex-police chief Wang Lijun, answering questions from journalists at a meeting on the sidelines of the NPC.
He said he had not imagined Mr Wang would run off. It came suddenly, Mr Bo said.
"I feel like I put my trust in the wrong person," he added, speaking at a meeting of Chongqing delegates to the parliament, officially called the National People's Congress (NPC).
Mr Wang's visit to the US consulate in the city of Chengdu sparked rumours that he had intended to defect. State media reported that he was on vacation to recuperate from stress.
Mr Wang, who led the crackdown on organised crime in Chongqing that propelled both him and his boss into the limelight, was later placed under police investigation for the incident.
Premier Wen Jiabao, answering a question at a news conference on Wednesday at the closing of the NPC session, said ''progress'' had been made in the investigations, but did not reveal details.
He said local authorities must ''seriously'' reflect and learn from the incident and that Beijing regarded this ''very seriously''.
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