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Ilie Bolojan lost the vote after the largest party in his coalition joined the far-right opposition to depose him.
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The largest party, the left-wing Social Democrats, abandoned Bolojan's four-party coalition last month and joined the far-right opposition to call for the vote.
The Social Democrats have repeatedly clashed with Bolojan, a liberal, over austerity measures aimed at reducing the budget deficit.
President Nicusor Dan, who is now expected to try to rebuild the coalition under a different prime minister, has sought to give reassurances that Romania - an EU and Nato member which borders Ukraine - will retain its pro-Brussels stance.
A total of 281 MPs voted for the no-confidence motion, well above the 233 needed for the measure to pass.
Elections are not due until 2028, and though a snap poll is unlikely, financial markets are concerned that the turbulence could mean Romania wavers in its commitment to narrowing the EU's biggest budget deficit.
Romania's currency, the leu, fell to a record low against the euro ahead of Tuesday's vote.
Bolojan's coalition came to power 10 months ago during efforts to curb the rise of the far-right Alliance for Uniting Romanians (AUR), which won one-third of parliamentary seats.
Dan himself won a tense presidential poll last May, after a far-right victory in elections the previous year was annulled over allegations of campaign fraud and Russian interference.
The coalition had started to reduce the deficit but frictions with the Social Democrats grew as the leftists' voter base was hit by austerity.
The party has said it is prepared to rejoin a pro-EU coalition under a different prime minister.
"Political discussions will be difficult, but it is my responsibility as president - and that of the political parties - to steer Romania in the right direction," Dan told reporters.
The president is now expected to nominate a different member of Bolojan's party, or possibly a technocrat, to lead a new government. Bolojan will continue as caretaker prime minister until it is approved.
George Smyth, 18, has been
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