"The cabinet has agreed to appoint Niwattumrong Boonsongpaisan to act as caretaker prime minister," PhongthepThepkanjana, a deputy prime minister said.
He was speaking after Thailand's Constitutional Court dismissed Prime Minister YingluckShinawatra from office for abuse of power, in a ruling that threatens to unleash a new wave ofpolitical unrest in the kingdom.
The court, which has played a key role in deposing Shinawatra-linked governments in recent turbulent chapters of Thai politics, ruled unanimously that she acted illegally by transferring a top security official in 2011.
"Therefore her prime minister status has ended... Yingluck can no longer stay in her position acting as caretaker prime minister," presiding judge CharoonIntachan said in a televised ruling.
Several cabinet ministers who endorsed the decision to transfer the security official will also be stripped of their status.
The case plunges Thailand deeper into a prolonged political crisis with anti-government protesters still on Bangkok's streets and Yingluck's "Red Shirt" supporters also threatening to rally to defend her, raising fears of clashes.
Jubilant anti-government demonstrators blew whistles outside the court to mark her removal – a key demand of their movement, which is seeking to curb the influence of Yingluck's billionaire brother, Thaksin.
"I am happy even though the whole cabinet has not been removed. People who do not respect the law should be thrown out," Linjong Thummathorn told AFP.
The kingdom has been bedevilled by a bitter political schism since 2006 when an army coup deposed former telecoms magnate Thaksin.
He is reviled by the royalist Bangkok elite, the middle class and southerners who say he has sponsored nepotism, widespread corruption and perceive him as a threat to the monarchy.
But he is loved in the populous, poor and mainly rural north and northeast and among the urban working class for recognising their burgeoning political and economic aspirations.
They have returned Shinawatra-led or linked governments to power in every election since 2001.
Thaksin lives overseas to avoid jail for corruption convictions, but is accused of running the country by proxy through his sister.
The ruling Puea Thai party has accused the court of railroading through Yingluck's case to satisfy its political bias against the Shinawatras.
The Constitutional Court oversees cases of violations of Thailand's charter, which was rewritten after Thaksin's removal.
In 2008, the court forced two Thaksin-linked prime ministers from office.
It also annulled the February election called by Yingluck to shore up her flagging administration, citing widespread disruption by opposition protesters.
Yingluck will also learn in the coming days if she will be indicted by anti-graft officials for neglect of duty charges in connection with a costly rice subsidy scheme.
An unfavourable ruling could also see her impeached by the senate and banned from politics for five years.
Six months of street protests have left 25 people dead and hundreds wounded in gun and grenade attacks, kindling fears of wider clashes between rival political sides.
Pro-government "Red Shirts" say they will not accept another democratically elected government being upended by the Thai courts.
With both sides convinced they can prevail, the battle for "Thailand's soul" looks set to drag on, said Thitinan Pongsudhirak, director of the Institute of Security and International Studies at Bangkok's Chulalongkorn University.
"Somehow both sides have to think that they cannot win it all – that's when we will see some compromise... but right now we are likely to see things get much worse before things get better."