NSW Finance Minister Greg Pearce has been sacked for breaching the ministerial code of conduct, Premier Barry O'Farrell says.
Mr O'Farrell says he told Mr Pearce of his decision over the phone at 1.45pm (AEST) on Thursday.
It follows months of allegations of wrongdoing and questionable conduct by Mr Pearce.
On Thursday, after previously standing by Mr Pearce, Mr O'Farrell said the finance minister had failed to declare a conflict of interest in appointing lawyer Richard Fisher to the board of Sydney Water.
Mr Pearce's wife reported to Mr Fisher in her area of work, Mr O'Farrell said.
"The ministerial code of conduct is very clear," Mr O'Farrell told reporters.
"I've repeatedly said I expect the highest standards from my government.
"Where codes are broken there will be consequences."
Mr Pearce will be replaced by Disabilities Services Minister Andrew Constance.
John Ajaka will join cabinet as Mr Constance's replacement.
Mr Pearce was disappointed and unhappy with the decision, Mr O'Farrell said.
The premier added that Mr Fisher was clearly "meritorious", having been appointed previously by both sides of politics to positions ranging from the Australian Law Reform Commission to the Library Council of NSW.
"But what's clear is where there are apparent or possible or actual conflicts of interest, those interests either have to be avoided or ... declared.
"That did not happen."
Mr Fisher was appointed to the Sydney Water board in 2011.
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