Libya's House of Representatives suspended Fathi Bashagha as head of the Government of National Stability on Tuesday, according to spokesman Abdullah Bliheg.
Parliament also announced an investigation into Bashagha.
The chamber had picked Bashagha in February last year to lead a government to replace that of Prime Minister Abdulhamid Dabaiba, who sits in Tripoli.
"The House of Representatives voted unanimously to suspend the chief of government Fathi Bashagha and open an investigation against him," said the House spokesman Abdullah Bliheg after a closed-door meeting in Benghazi.
Deputies assigned the administration's finance minister, Osama Hamad, to act as prime minister while the investigation takes place, Bliheg said.
Since his failed attempts to force Dabaiba out, Bashagha has been based in the central city of Sirte.
House of Representatives member Abdelmoneim Al-Arfi said that the dismissal of Bashagha being added to the parliament’s agenda surprised a number of deputies but added there has been chatter about forming a mini-government entrusted with conducting elections.
Member Jibril Wahida explained that Bashagha was unable to take power in Tripoli or reach the elections and has been “spending from emergency funds outside of the budget allocated to his government". Adding, "he spent money that we knew nothing about and when we tried to discuss the matter with him, we did not receive any answers."