The president ordered Prime Minister Manuel Valls to form a new cabinet "consistent with the direction [Hollande] has set for the country," the presidency said in a statement.
It did not give any reasons, but the move comes after Economy Minister Arnaud Montebourg spent his weekend bad-mouthing the country's economic direction and ally Germany in a much-criticised show of insubordination.
On Saturday, Montebourg told daily newspaper Le Monde that France would no longer "be pushed around" by Germany.
"You have to raise your voice. Germany is trapped in an austerity policy that it imposed across Europe," the Socialist minister said.
Then in a speech on Sunday, Montebourg said he had asked Hollande and Valls for a "major shift" in economic policy.
"Given the seriousness of the economic situation, an economy minister has a duty to offer alternative solutions," he told Socialist Party supporters at a rally in eastern France.
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