118 MPs voted to unseat Essid who has been criticised for failing to tackle the country's economic crisis, unemployment and jihadist attacks
Tunisian Prime Minister Habib Essid on Saturday lost a confidence vote in parliament, after just a year and a half in office.
A total of 118 MPs voted to unseat Essid, three voted for him to stay at the helm and 27 abstained.
Essid's government has been widely criticised for failing to tackle the country's economic crisis, high unemployment and a series of jihadist attacks. He had been under growing pressure since President Beji Caid Essebsi appeared on local television in June to criticise the administration and propose creating a new government of national unity.
"I'm quite aware that the vote will be against me," Essid, 67, had told parliament ahead of the planned vote.
"I didn't come to obtain the 109 votes (needed to remain in office). I came to expose things to the people and to members of parliament," he had said before the vote.
Essid has been under growing pressure since President Beji Caid Essebsi appeared on local TV in June to slam the administration and propose creating a new government of national unity.
The premier said he would be ready to resign "if the country's interest demanded it", but has said he refused to leave under pressure without a vote of confidence.
Essid had already been forced into a broad reshuffle in January, when the country witnessed some of its worst social unrest since the 2011 uprising that toppled longtime dictator Zine El Abidine Ben Ali.
His supporters have condemned "pressure" from supporters of Hafedh Caid Essebsi, the president's son who is among the leaders of the Nidaa Tounes party.
Essid's coalition government includes four groups including the party Essebsi founded in 2012, Nidaa Tounes, and the Islamist Ennahda party.
Tunisia, whose 2011 uprising inspired similar revolts across Arab countries, has been touted as a regional example of a successful transition to democracy after a revolution.
But successive governments have struggled to tackle a jihadist insurgency and to revive the country's flagging economy.
Security forces frequently engage in deadly clashes with extremist groups in the mountainous west of the country.
Last year the Islamic State jihadist group claimed two high-profile attacks in Tunisia that killed 59 foreign tourists.
The country has been in a state of emergency since November, when a suicide bombing, also claimed by IS, killed 12 presidential guards in central Tunis.
Economic growth slowed to 0.8 per cent last year from 2.3 per cent in 2014, and unemployment nationwide stood at 15 per cent at the end of last year.