Mr Zahawi, who was appointed to the role by the Prime Minister last October, had been facing calls to stand aside after Mr Sunak ordered an ethics inquiry into the former chancellor’s tax affairs.
The Tory chairman had faced damaging reports that he had settled an estimated £4.8 million bill with HM Revenue & Customs while he was chancellor, including paying a penalty.
Pressure on ministers grew after HMRC boss Jim Harra told MPs there are “no penalties for innocent errors in your tax affairs”.
The rapid conclusion of the investigation by Sir Laurie Magnus, the Prime Minister’s independent adviser on ministers’ interests, came after Mr Sunak resisted calls to sack his party colleague immediately and instead stressed the need for “due process”.
But in a letter published on Sunday morning and following Sir Laurie’s inquiry, Mr Sunak told Mr Zahawi that he believed he had committed a “serious breach of the Ministerial Code”.
“As a result, I have informed you of my decision to remove you from your position in His Majesty’s Government.”
In the letter, Mr Sunak told the Tory MP: “When I became Prime Minister last year, I pledged that the Government I lead would have integrity, professionalism and accountability at every level.”
He paid tribute to Mr Zahawi’s contribution to the Government, including his role as vaccines minister during the pandemic.
“As you leave, you should be extremely proud of your wide-ranging achievements in Government over the last five years.
“In particular, your successful oversight of the Covid-19 vaccine procurement and deployment programme which ensured the United Kingdom was at the forefront of the global response to the coronavirus pandemic.”
In his reply to the Prime Minister, Mr Zahawi did not explicitly refer to the findings of the inquiry.
The row surrounding Mr Zahawi had centred on a tax bill over the sale of shares in YouGov – the polling firm he founded – worth an estimated £27 million and which were held by Balshore Investments, a company registered offshore in Gibraltar and linked to Mr Zahawi’s family.
Mr Zahawi, who has been MP for Stratford-upon-Avon since 2010, had said that HMRC concluded there had been a “careless and not deliberate” error in the way the founders’ shares, which he had allocated to his father, had been treated.
He had also insisted he was “confident” he had “acted properly throughout”.
On Sunday, he told Mr Sunak that he was concerned “about the conduct from some of the fourth estate in recent weeks”, in a reference to the media.
He said: “It has been, after being blessed with my loving family, the privilege of my life to serve in successive governments and make what I believe to have been a tangible difference to the country I love.”
In comments which appear to indicate that the former chancellor holds out little prospect of returning to office in the years to come, he said: “You can be assured of my support from the backbenches in the coming years. Your five priorities are the right priorities, and I will do whatever I can to help you deliver them.”
Sir Laurie’s four-page report, dated January 29, said the technical details of the HMRC investigation were outside his scope.
Instead, he considered Mr Zahawi’s “handling of the matter in light of his responsibilities as a Mminister”.
In that regard, he found that the Tory chairman had shown “insufficient regard for the general principles of the Ministerial Code and the requirements in particular, under the seven Principles of Public Life, to be honest, open and an exemplary leader through his own behaviour”.
Among the findings, he notes “omissions” from Mr Zahawi that amount to a “serious failure” to meet the standards of the Ministerial Code.
He said: “In the appointments process for the governments formed in September 2022 and October 2022, Mr Zahawi failed to disclose relevant information – in this case the nature of the
investigation and its outcome in a penalty – at the time of his appointment, including to Cabinet Office officials who support that process.
“Without knowledge of that information, the Cabinet Office was not in a position to inform the appointing Prime Minister.”
The sacking came as Levelling Up Secretary Michael Gove toured broadcast studios on behalf of the Government.
“Because someone commits a lapse or a sin, that shouldn’t be automatically taken as an opportunity to damn an entire organisation or a way of working,” he told the BBC’s Sunday With Laura Kuenssberg programme as news of Mr Zahawi’s dismissal broke.
“There are always people who will fall short, whether it’s in politics or other parts of public life, or professional life, or in any area.”
Mr Sunak is unlikely to appoint a new Conservative chairman by the end of Sunday, the PA news agency understands.
Both Labour and the Liberal Democrats said it is vital that the public gets answers now about what and when Mr Sunak knew about the controversy.
Shadow education secretary Bridget Phillipson said the Prime Minister should have sacked the Tory MP a “long time ago”.
“It’s vital that we now get answers to what Rishi Sunak knew and when did he know it. We need to see all the papers, not just have the Prime Minister’s role in this brushed under the carpet.”
The Liberal Democrats also called on Mr Zahawi to go a step further and leave parliament.
But Mr Gove rejected calls for Mr Zahawi’s departure from politics, telling Times Radio that he should “absolutely not” quit as an MP.