Nine other caretaker cabinet members were also removed from office for their involvement in the controversial transfer of National Security Council chief Thawil Pliensri in 2011, Xinhua reported.
Ruling that the transfer was illegal, the Constitutional Court, however, said the remaining cabinet members would continue to perform caretaker duties until a new cabinet takes office.
Niwatthamrong Boonsongpaisan, earlier acting deputy premier and commerce minister under Yingluck's cabinet, has been appointed as the new caretaker prime minister.
The Pheu Thai Party, which led the caretaker government, denounced the court ruling, calling it a conspiracy to try to topple a democratic government.
In a statement, the party called on people who disagreed with the verdict to express their opposition by peaceful means such as peaceful demonstrations.
The case was filed by a group of senators led by Paiboon Nititawan after the Supreme Administrative Court March 7 ruled Yingluck's decision to transfer Thawil in 2011 had been unlawful and unfair because she had not given appropriate reasons for the action.
The court had ordered that Thawil be reinstated.
Thawil was replaced by then police chief Pol Gen Wichean Potephosree in 2011. Pol Gen Priewpan Damapong, a relative of Yingluck, later succeeded Pol Gen Wichean as police chief.
The Constitutional Court Tuesday heard testimony from Yingluck, Thawil, Pol Gen Wichean and Senator Paiboon, the Bangkok Post reported.
Paiboon told the court that Yingluck had abused her authority by transferring Thawil as, with that, she opened the way for Pol Gen Priewpan to become national police chief.
Yingluck, who was first sworn in as premier Aug 10, 2011, insisted the transfer complied with the law. She said she did nothing wrong in exercising her administrative authority to transfer the national security chief.
Yingluck said she did not abuse her authority because she was legally authorised to transfer state officials.