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The official Soviet news agency, Tass, announced that a plenary meeting of the Communist Party Central Committee had accepted Mr Khrushchev's request to depart "in view of his advanced age and the deterioration of his health".
Mr Khrushchev, who is 70, took over as First Secretary of the Central Committee soon after Stalin's death.
He has held the role of both party leader and prime minister since 1958. These posts will now be divided with 57-year-old Leonid Brezhnev heading the Soviet Communist Party, while 60-year-old Alexei Kosygin, will take the post of prime minister.
The news has come as a shock to Soviet diplomats in London who were unaware that their leader might be unwell.
Governments of Western Europe have also been taken aback and fear the new leadership might shift away from Mr Khrushchev's policy of peaceful co-existence with the West.
A flamboyant character, Mr Khrushchev is described in the Times newspaper today as "the most colourful leader world communism has produced".
He took over from Joseph Stalin when he died in 1953.
In 1955 he began the first of several visits abroad to improve Soviet relations with the rest of Europe, America and Asia.
His first stop was Yugoslavia where he apologised in person to Marshal Josef Tito for Stalin's attack on Yugoslav Communism in 1948.
His denunciation of Stalin in 1956 in what's known as the "secret speech" to the 20th Party Congress gave Soviet satellite states such as Poland and Hungary new hope of more political freedom - which were soon crushed by Warsaw Pact troops.
During this speech, he also laid down the foundations of his foreign policy, moving away from the belligerent approach to capitalism and towards co-existence and competition.
For Western leaders, his brash and extrovert sense of humour was a refreshing change from the stern image of previous Soviet public figures.
He courted socialist parties abroad and encouraged cultural exchanges.
But his temper sometimes got the better of him - like the time he famously hit the table with his shoe during a United Nations debate in 1960 - and he was quick to warn of the USSR's nuclear weapons capability in his speeches in the international arena.
His leadership will also be remembered for bringing the world close to nuclear war by placing Soviet nuclear missiles in Cuba during the 1962 Cuban missile crisis.
The following day the Soviet government reassured the West it would continue the policy of peaceful co-existence.
It also indicated Nikita Khrushchev's departure was certainly not voluntary and criticised his "hare-brained scheming, bragging and phrase-mongering", without actually naming him.
There had been a growing opposition to his failed agricultural and industrial policies, quarrels with China, and his humiliating climb-down over the Cuban missile crisis.
There was also a feeling he was trying to create a cult of personality - much like his predecessor Stalin - in taking on the two roles of prime minister and head of the Communist Party.
Mr Khrushchev lived the rest of his life away from the public eye in Moscow and at his country dacha as a special pensioner of the Soviet Government.
In 1970 his memoirs were published in the United States and Europe, but not in the Soviet Union.
He died on 11 September 1971 but was denied a state funeral and interment in the Kremlin wall, and is buried at Novodevichy Convent Cemetery in Moscow.
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