From the BBC, we find out more about the politically motivated firing.
The government owns a 25% stake in Grameen, which pioneered the microfinance concept of lending small amounts of money to the poor which has been replicated worldwide.
Our correspondent says that the dispute over Prof Yunus' sacking is now likely to end up being resolved by the courts.
Bangladesh Bank, the country's central bank, said that Prof Yunus had violated the country's retirement laws by staying on as Grameen's head long past the mandatory retirement age of 60. Prof Yunus is 70.
"Bangladesh Bank has relieved Yunus of his duties as managing director of the Grameen Bank," Muzammel Huq, the government-appointed chairman of Grameen Bank, said.
Mr Huq also said that Prof Yunus had did not received the required approval from Bangladesh Bank when he was appointed managing director in 1999.
"Grameen Bank by-laws clearly state that the managing director should be appointed by the board with the prior approval of the Bangladesh Bank,'" he said.
Mr Huq said a letter from the central bank ordering the removal of Prof Yunus had been sent to Grameen Bank.
"The bank's senior-most managing director automatically becomes the [interim] managing director. I will convene a board meeting very soon and it will soon appoint a committee to find a [permanent] managing director."
But a Grameen Bank statement later on Wednesday said that the matter was now "a legal issue" and that the bank had complied with "all applicable laws in respect of appointment of the managing director".
"According to the bank's legal advisers, the founder of Grameen Bank, Nobel laureate Professor Muhammad Yunus, is accordingly continuing in his office," the statement said.