Egyptian President Mohammed Mursi has ordered the retirement of the powerful head of the country's armed forces, Field Marshal Mohamad Hussein Tantawi, a presidential spokesman has said.
He also said a constitutional declaration aimed at curbing presidential powers had been cancelled.
Mr Mursi, who was elected in June, is a member of the Muslim Brotherhood.
Relations between Islamists and the military have been increasingly tense since the fall of President Mubarak.
"Field Marshal Hussein Tantawi has been transferred into retirement from today," presidential spokesman Yasser Ali said in a statement.
He added that a career army officer, Gen Abdul Fattah al-Sisi, would replace Field Marshal Tantawi as both armed forces chief and defence minister.
Chief-of-staff Gen Sami Annan was also retiring, the spokesman announced.
Field Marshal Tantawi, 76, has not yet indicated whether he accepts the moves.
However Gen Mohamed al-Assar, a member of the Supreme Council of the Armed Forces (Scaf), told Reuters news agency that the decision had been "based on consultation with the field marshal, and the rest of the military council".
BBC Middle East correspondent Kevin Connolly says the dismissal of senior military officers will be seen by Egyptians as a decisive move in a struggle for real power between the country's newly elected politicians and the generals who have exercised power for many years.
As head of Scaf, Field Marshal Tantawi became Egypt's interim ruler after President Hosni Mubarak was ousted following mass protests in February last year.
Under the interim constitutional declaration issued by Scaf before Mr Mursi was sworn in, the president could not rule on matters related to the military - including appointing its leaders.
The council also dissolved parliament, which is dominated by the Muslim Brotherhood.
Tensions between the presidency and Scaf were further exacerbated after Islamist militants in the Sinai peninsula killed 16 border guards last week, in a raid that embarrassed the military.
The president, whose own Brotherhood movement renounced violence long ago, sacked Egypt's intelligence chief and two senior generals following the attack.
The presidential spokesman said Gen Annan and Field Marshal Tantawi had been appointed as presidential advisers and were given Egypt's highest state honour, the Grand Collar of the Nile.