Russian President Vladimir Putin has relieved his chief of staff, Alexander Voloshin, of his duties.
Voloshin is described as a liberal, pro-business figure
Mr Voloshin is reported to have tendered his resignation on Wednesday over the arrest of Russia's richest businessman, Mikhail Khodorkovsky, over the weekend on charges of tax evasion, fraud and forgery.
The chief of staff's departure came hours after prosecutors impounded a 44% stake in Mr Khodorkovsky's company, Yukos, under laws designed to tackle organised crime.
Correspondents say the moves against Yukos were part of a power struggle between hardliners and liberals.
Mr Voloshin, 47, has been described as a liberal and a pro-business figure with strong sympathies for Mr Khodorkovsky and his oil empire.
He was one of the last key figures in the Kremlin to have survived from the previous administration of Boris Yeltsin.
Best case scenario
The move appears to signal the strengthening of the hardliners in Mr Putin's entourage.
However, Kremlin spokesman Dmitry Gromov told local media that Mr Voloshin would be replaced by his deputy Dmitry Medvedev, a close associate of Mr Putin from St Petersburg.
Voloshin was instrumental in Putin's rise to power
The BBC's Nikolai Gorshkov in Moscow says this may well me the best case scenario to take Russia out of the current political crisis.
Mr Medvedev has never served in the secret service and is thought to be more at ease with liberals than with the ex-KGB officials in the administration.
He came to know Mr Putin 12 years ago when they both worked in the city government in St Petersburg.
He was chief manager of Mr Putin's first election campaign and he is believed to be very close to the president.
In a recent BBC interview, Mr Voloshin described Mr Medvedev as the most sensible member of the new crop of Kremlin staff.
Mr Voloshin was seen as a power behind the throne in Moscow during both Mr Yeltsin's and Mr Putin's administrations.
He was appointed to his post in 1999 after a year as deputy chief of staff and came to be seen as a key figure in a group sometimes known as the "family", closely linked to Mr Yeltsin.
He helped to facilitate Mr Putin's rise to power, and the creation of the pro-presidential Unity party.
Unity's success in parliamentary elections in December 1999 help provide an electoral base for Mr Putin's victory in presidential elections the following March.
Mr Voloshin was seen as a major supporter of big business and a counterweight to the powerful defence, interior and security portfolios.
Rumours about his possible resignation have been circulating for months following a series of investigations of Yukos and Mr Khodorkovsky.
He is said to have been furious that the president had not informed him of Mr Khodorkovsky's imminent arrest.