Bangladeshi Nobel laureate Muhammad Yunus has said that he will fight attempts to remove him from the Grameen microfinance bank which he founded.
The central bank sacked him saying he was past retirement age and had been improperly installed in his post.
Grameen Bank disputes the accusations. It says it is taking legal advice and that Prof Yunus remains in office.
Prof Yunus pioneered micro-lending to the poor but has been under pressure from the government to step down.
The BBC's Anbarasan Ethirajan in Dhaka says that the effort to remove Prof Yunus is the culmination of a long-running feud with the government, which has been taking a series of measures in recent months to remove him.
'Continuing in office'
Prof Yunus fell out with Prime Minister Sheikh Hasina in 2007 when he was trying to set up a new party.
The government owns a 25% stake in Grameen, which pioneered the microfinance concept of lending small amounts of money to the poor which has been replicated worldwide.
Our correspondent says that the dispute over Prof Yunus' sacking is now likely to end up being resolved by the courts.
Bangladesh Bank, the country's central bank, said that Prof Yunus had violated the country's retirement laws by staying on as Grameen's head long past the mandatory retirement age of 60. Prof Yunus is 70.
"Bangladesh Bank has relieved Yunus of his duties as managing director of the Grameen Bank," Muzammel Huq, the government-appointed chairman of Grameen Bank, said.
Mr Huq also said that Prof Yunus had not received the required approval from Bangladesh Bank when he was appointed managing director in 1999.
"Grameen Bank by-laws clearly state that the managing director should be appointed by the board with the prior approval of the Bangladesh Bank," he said.
Mr Huq said a letter from the central bank ordering the removal of Prof Yunus had been sent to Grameen Bank.
"The bank's senior-most managing director automatically becomes the [interim] managing director. I will convene a board meeting very soon and it will soon appoint a committee to find a [permanent] managing director."
But a Grameen Bank statement later on Wednesday said that the matter was now "a legal issue" and that the bank had complied with "all applicable laws in respect of appointment of the managing director".
"According to the bank's legal advisers, the founder of Grameen Bank, Nobel laureate Professor Muhammad Yunus, is accordingly continuing in his office," the statement said.
Correspondents say that the attempted sacking of Prof Yunus is not likely to be well-received internationally.
A group of charities led by former Irish President Mary Robinson came to his defence last month, arguing that he had been unfairly vilified by the government.
The Friends of Grameen group alleged that Prof Yunus had been subjected to "politically orchestrated" and "increasingly aggressive" attacks.
In December, Prime Minister Sheikh Hasina accused Prof Yunus of treating Grameen Bank as his "personal property" and claimed that it was "sucking blood from the poor".
The Bangladeshi government set up a review committee the following month to look into the bank's affairs amid reports that it could take it over.
Around the same time as these developments, a TV documentary alleged that aid money had been wrongly transferred from one part of Grameen to another in the mid-1990s.
The bank denied all the charges and later the Norwegian government, one of its main donors, gave it the all-clear.
Mrs Robinson said in February that some highly visible private microcredit experiences had been set up around the world because of the pioneering work of Prof Yunus to provide loans to the poor.
But critics say that the microcredit concept worldwide has been discredited - in India it has been alleged that onerous conditions placed on borrowers has led to a spate of suicides.