The right-wing Swiss People's Party withdrew from the ruling coalition on Thursday after top party figure Christoph Blocher was ousted from the cabinet and a more moderate party rival took his place.
The withdrawal of the People's Party ends half a century of consensus government among Switzerland's four main parties and swings the balance of power more towards the centre in the country of over seven million.
The Swiss parliament ousted Blocher as justice minister on Wednesday. The billionaire industrialist had been a leading force in delivering victory for the People's Party in an October election with 29 percent of the vote.
His dismissal from the seven-member executive was sealed on Thursday when Eveline Widmer-Schlumpf, a more moderate party rival, accepted parliament's nomination to take his place.
Caspar Baader, head of the People's Party's parliamentary faction told parliament the party would go into opposition and would no longer recognise Widmer-Schlumpf or fellow People's Party minister Samuel Schmid.v "Switzerland now has a centre-left government," Baader told the assembly.
"You have destroyed our treasured system of government and sacrificed your sworn interest in concordance, collegiality and tolerance to benefit your own short-term power lust." Blocher vowed to continue his work with the party in opposition.
"The great thing about this country is that parliament can throw people out of the government but not out of politics," he told the house.
Blocher helped transform the People's Party from a small group mainly representing farmers' interests into a populist business-friendly party with strong support among middle-class voters worried about immigration and crime.
He featured heavily on campaign posters during October's elections which saw his party achieve the best result by an individual party since Switzerland introduced proportional representation in 1919.
The campaign also attracted accusations of racism when posters showed a black sheep being kicked off a Swiss flag by three white sheep. The party said the 'black sheep' referred only to criminal foreigners.