Turkish President Tayyip Erdogan sacked the central bank governor for refusing the government's repeated demands for rate cuts, Hurriyet newspaper on Sunday quoted Erdogan as telling a meeting with his party's lawmakers.
Murat Cetinkaya, who had been serving as the governor since April 2016, was removed from the role and was replaced by his deputy Murat Uysal, according to a presidential decree published on the official gazette on Saturday.
The move came after months of tension with the government over high interest rates.
Turkey's president has fired the central bank governor amid the country's economic downturn.
However, it comes amid reports of disagreements over interest rates, which the government wants to lower in a bid to boost economic growth.
A critic of high rates, Mr Erdogan has repeatedly blamed the central bank for high levels of inflation, which soared.
In the face of the market turmoil, the former head of the central bank hiked the benchmark interest rate by 625 basis points in September and has since held onto it despite criticism from Erdogan.
However, the Erdogan-led government was not available to immediately deliver a response.
Analysts expect the central bank could ease monetary policy at a July 25 meeting if the lira is not hit this month by threatened US sanctions over Turkey's purchase of a Russian missile defence system.
He also said that communication channels will be used in line with the central bank's targets.
Turkish inflation fell to 15.72 per cent in June - the lowest rate in almost a year - from 18.71 per cent in May, official statistics showed on Wednesday.
In a written statement on Saturday, Uysal said he would independently implement monetary policy instruments focused on achieving and maintaining the primary objective of price stability.
However, Cetinkaya's sacking comes just days before Turkey is expected to take delivery of Russian air defense systems, triggering likely USA sanctions which could put the lira under renewed pressure.
Annual inflation hit a 15-year high in October above 25%, but later dipped and is now running just over 15.5%.
And a modest recovery in the lira's value so far in 2019 failed to protect Mr Erdogan's party from some electoral fallout in this year's local elections, in which he lost control of Istanbul.