Egypt's army chief Abdel-Fattah el-Sissi said Morsi will be replaced by the chief justice of the Supreme Constitutional Court. It was not clear whether the chief justice would act as the interim president before official elections get under way.
In a televised address to the nation on Wednesday, el-Sissi said a government of technocrats will be appointed to run the country during a transition period he did not specify.
Cheers erupted among millions of protesters nationwide who were demanding Morsi be removed.
Following the ouster, Morsi's aide Ayman Ali said the former leader was moved to an undisclosed location. No other details were given.
President Barack Obama says he's ordered his administration to review U.S. foreign aid to Egypt. He says he's calling on Egypt's military to return authority to a democratically elected civilian government as soon as possible.
"The U.S. is monitoring the very fluid situation and believes ultimately the future of Egypt can only be determined by the Egyptian people and we are deeply concerned by the decision of the Egyptian armed forces to remove president Morsi and suspend the constitution," Mr. Obama said.
According to two U.S. officials, Egyptian defense leaders have assured the U.S. that they are not interested in a long-term rule.
The officials say the leaders, in calls with Defense Secretary Chuck Hagel and Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff, pledged to put a civilian government in place quickly.
The U.S. officials also said the Egyptian military has said it will take steps to ensure the safety of Americans in Egypt, including the diplomatic mission.
The officials spoke on condition of anonymity because they were not authorized to speak on the record about the matter.
The ouster follows a chain of events and reports throughout the day. Earlier, Al Hayat TV reported that Morsi was under house arrest. Morsi's spokesman denied the report, according to ABC News, but word of the house arrest provoked cheers in Tahrir Square.
This came as Egypt's military moved to tighten its control on key institutions before their afternoon ultimatum expired.
The military stationed officers in the newsroom of state television on the banks of the Nile River in central Cairo. Troops were deployed in news-production areas.
Officers from the army's media department moved inside the newsroom and were monitoring output, though not yet interfering, staffers said, speaking on condition of anonymity because they were not authorized to talk about the arrangements.
This move shows the military's preparation for an almost certain push to remove the country's Islamist president when an afternoon ultimatum expires.
Earlier, Egyptian leaders met with the army chief. This meeting also signaled the military was taking concrete moves toward implementing its plan to replace Morsi, Egypt's first freely elected leader who came to office a year ago.
It was never clear exactly what would happen after the deadline passed, which was at 7 a.m. - 8 a.m. PT Wednesday. Under a plan leaked to state media, the military said it would install a new interim leadership, suspend the Islamist-backed constitution and dissolve the Islamist-dominated parliament.
Demonstrations turned violent overnight. Clashes between supporters and opponents of Egypt's president have left at least 39 people dead since the protests began Sunday.
Opponents of Morsi claim his mistakes in running the country have cost him legitimacy. They want him to step down immediately.
Morsi is a member of the Muslim Brotherhood, which is standing by him. An official said the head of the Muslim Brotherhood's political party and the group's deputy chief have been arrested.
Late Tuesday, Morsi gave a defiant speech, insisting he is staying in power. He also wants the military to stand down.
Experts watching the situation feel that Morsi lost the trust of the people early on when he and the Muslim Brotherhood took power and made changes to the country's constitution.
"It is not the economy. It is the quest for freedom and feeling that they have been betrayed and the resenting to replace a dictatorship of Mubarak by a theocracy dictatorship, where it will be the dictator is ruling but garbing himself in religion," said Dr. Maher Hathout with the Muslim Public Affairs Council.
The tension in Egypt is having an impact on global markets - especially the oil markets. Oil is now trading above $100 a barrel for the first time in close to a year. Egypt's Suez Canal is a major transit route for crude shipments from the Persian Gulf.
ABC News and the Associated Press contributed to this report.