Gavin Williamson has been sacked as defence secretary following an inquiry into a leak from a top-level National Security Council meeting.
Downing Street said the PM had “lost confidence in his ability to serve” and Penny Mordaunt will take on the role.
The inquiry followed reports over a plan to allow Huawei limited access to help build the UK’s new 5G network.
Mr Williamson, who has been defence secretary since 2017, “strenuously” denies leaking the information.
In a meeting with Mr Williamson on Wednesday evening, Theresa May told him she had information that provided “compelling evidence” that he was responsible for the unauthorised disclosure.
In a letter confirming his dismissal, she said: “No other, credible version of events to explain this leak has been identified.”
Responding in a letter to the PM, Mr Williamson said he was “confident” that a “thorough and formal inquiry” would have “vindicated” his position.
“I appreciate you offering me the option to resign, but to resign would have been to accept that I, my civil servants, my military advisers or my staff were responsible: this was not the case,” he said.
BBC political editor Laura Kuenssberg said Mr Williamson was “sticking to his story that it was nothing to do with him”.
She said the leak from the security council was “unusual” and “clearly she (the PM) felt that she had to take action in this case”.
But security correspondent Frank Gardner said the BBC had been told that “more than one concerning issue” had been uncovered regarding Mr Williamson during the leak inquiry and not just the Huawei conversation.
The inquiry into the National Security Council leak began after a Daily Telegraph report on the Huawei decision and subsequent warnings within cabinet about possible risks to national security over a deal with Huawei.
The National Security Council (NSC) is made up of senior cabinet ministers and its weekly meetings are chaired by the prime minister, with other ministers, officials and senior figures from the armed forces and intelligence agencies invited when needed.
It is a forum where secret intelligence can be shared by GCHQ, MI6 and MI5 with ministers, all of whom have signed the Official Secrets Act.
There has been no formal confirmation of Huawei’s role in the 5G network and No 10 said a final decision would be made at the end of spring.
Huawei has denied there is any risk of spying or sabotage, or that it is controlled by the Chinese government.
Mrs May said the leak from the meeting on 23 April was “an extremely serious matter and a deeply disappointing one”.
Theresa May’s letter to Gavin Williamson
It is vital for the operation of good government and for the UK’s national interest in some of the most sensitive and important areas that the members of the NSC – from our armed forces, our security and intelligence agencies, and the most senior level of government – are able to have frank and detailed discussions in full confidence that the advice and analysis provided is not discussed or divulged beyond that trusted environment.
“That is why I commissioned the cabinet secretary to establish an investigation into the unprecedented leak from the NSC meeting last week, and why I expected everyone connected to it – ministers and officials alike – to comply with it fully. You undertook to do so.
“I am therefore concerned by the manner in which you have engaged with this investigation.”
Defence Committee chairman Julian Lewis told the BBC that Mr Williamson’s sacking was a “loss” when looked at “purely” from the point of view of defence.
He said he thought “very highly” of Ms Mordaunt – the first woman to take the role of defence secretary.
Rory Stewart has been confirmed as the new international development secretary, taking over from Ms Mordaunt.