Saudi King Salman bin Abdulaziz has dismissed Crown Prince Moqren bin Abulaziz bin Saud and replaced him with his nephew Muhammad bin Nayef as the new heir to the throne.
In a major cabinet reshuffle, the king has removed the existing crown prince through a royal decree via the state-run Saudi Press Agency.
"We have decided to respond to His Highness and what he had expressed about his desire to be relieved from the position of crown prince," a statement from the royal court read.
The Saudi king has also sacked Moqren, who is the king's younger half-brother, from the post of deputy prime minister. The official statement said he was removed upon his own request.
In addition to being the crown prince, Nayef will also continue as interior minister, and the chief of the coordinating body, political and security council.
King Salman's son Prince Muhammad bin Salman, current defence minister, has also been named as the deputy crown prince.
The changes have come at a time when the Arab world's biggest economy is facing challenges over lowering oil prices, the main source of income for the Kingdom.
"The Saudi Arabia we knew a few hours ago is no longer. These are serious changes that will have repercussions not only domestically but also internationally," Khalil Jahshan, executive director of US-based Arab Centre of Washington, told Al Jazeera.
"This is a very decisive answer by King Salman to the doubts that many experts have expressed since he came into power with regards to his health, his decisiveness and his control over political matters in the kingdom. And this is his unequivocal answer."
The dismissal of Moqren cements power in the hands of the younger generation of princes, and he is the highest-level casualty from the era of King Abdullah. King Salman took over the Sunni-inclined state from former king Abdullah following his death in January.