The Kuwaiti cabinet has nominated Prime Minister Sheikh Sabah al-Ahmad al-Sabah as new emir of the oil-rich Gulf state.
Hours earlier, parliament had voted to oust his cousin, at the climax of a nine-day succession crisis that split the ruling Sabah dynasty.
During that time, the designated heir, Sheikh Saad al-Abdullah, 76, was deemed too ill to take the oath of office.
However, he refused to abdicate in favour of Sheikh Sabah, who already serves as Kuwait's de facto ruler.
The crisis was triggered by the death of long-serving Emir Sheikh Jaber al-Ahmad on 15 January, and the automatic succession of Sheikh Saad, a popular figure who has been crown prince since 1978.
He has played little part in public life in the past few years, after his health deteriorated following surgery for a bleeding colon.
It is the first time that one of the six Arab Gulf countries has changed its ruler through the constitutional process - and is a rare show of muscle by a parliament in the Arab world.
The emirate controls about 10% of the world's proven oil reserves and is a key US ally in the region.
Parliament speaker Jassem al-Khorafi said the unprecedented parliamentary vote was taken moments before a letter of abdication from Sheikh Saad arrived.
"The house listened to the emir's medical report and it became evident to the house, beyond any doubt, to transfer the emir's responsibilities permanently," he said.
Emir Sheikh Saad has taken little part in public life
Earlier on Tuesday, a government official said Sheikh Saad had unconditionally agreed to abdicate in the interests of Kuwait.
This was welcomed by MPs, who said they did not want to take sides in what is a dispute between different branches of the Sabah family.
However, the debate and vote went ahead after several postponements to give Sheikh Saad more time to consider his position.
The vote was passed unanimously by the 50 elected MPs and 15 members of cabinet.
Constitutionally, parliament can remove an emir on health grounds with a two-thirds majority, after it has been asked to by the cabinet.
The cabinet sent a letter to parliament on Monday saying the emir had "lost his health capability to exercise his constitutional prerogatives".
Tradition in the Sabah ruling dynasty stipulates that the position of emir should alternate between the two main branches of the family.
These are the Jaber branch, of which Sheikh Sabah and the late emir are members, and the Salem branch which produced Sheikh Saad.
Sheikh Sabah has been a major player in the Kuwaiti political sphere, which is dominated by his family, since independence from Britain in 1961.
He served as foreign minister for a remarkable 40 years, and deputy prime minister, before taking the job of prime minister in 2003.
Sheikh Saad is the son of the founder of modern Kuwait, Sheikh Abdullah al-Salem, and is remembered fondly for his role in rallying support during the 1990-91 Gulf crisis.