The founder of Pakistan's nuclear weapons programme has been removed from his post as a government adviser.
Mr Khan is revered by many in his country
Abdul Qadeer Khan was sacked after the Nuclear Command Council reviewed a probe into the alleged illegal sale of nuclear technology to Iran and Libya.
The decision confirms speculation that he was a prime suspect in the inquiry, says the BBC's Zaffar Abbas.
Mr Khan has held the post of scientific adviser since retiring as head of the country's top nuclear facility in 2001.
The inquiry began two months ago after the UN gave Pakistan information it had gathered about Iran and Libya's nuclear programmes.
More than 15 people from the country's premier nuclear enrichment facility, Khan Research Laboratories (KRL), have been questioned so far and five scientists and officials are still in the custody of the authorities.
Our Islamabad correspondent says that allegations about illegal sales in the Pakistani press make the country's future as a responsible nuclear power look vulnerable.
Khan's Kahuta plant is Pakistan's main nuclear weapons laboratory
The family of Dr Khan, a man who has always had financial and bureaucratic support from the military, says the scientist - now in effect under house arrest in the capital - is being made a scapegoat.
In question are alleged payments of hundreds of millions of dollars to scientists and officials in return for the possible transfer of nuclear know-how and even hardware.
Mr Khan's fall from grace has been dramatic.
The man who until recently was regarded as the so-called father of Pakistan's nuclear bomb was dismissed from his post by a simple notification.
He was appointed to the largely ceremonial post after he retired as the head of KRL.
An official spokesman said Mr Khan had been relieved of his responsibilities to allow a fair investigation into the nuclear proliferation scandal.
The spokesman said that, on the basis of the investigation, legal action will be taken against those found involved in selling nuclear know-how to a third country.