The two have frequently clashed over Israel's military offensive against Gaza following Hamas offensive on Israel on 7 October last year.
"In the midst of a war, more than ever, full trust between the prime minister and the defense minister is required," Netanyahu said in a statement issued by his office.
"Although in the first months of the campaign there was such trust and very productive work, over the past few months that trust has eroded," he added of his Likud party colleague.
Netanyahu said he had appointed Foreign Minister Israel Katz as the new defense minister, saying he had "already proven his abilities and his contribution to national security".
Gallant responded to his sacking by posting on social media that "the security of the state of Israel was and will always remain the mission of my life".
Netanyahu said he had made attempts to bridge the differences between him and Gallant.
"But they only grew wider. These divisions even reached public knowledge in an unusual manner and, worse, became known to our enemies, who took pleasure in them and derived substantial benefit from them," he said.
"The growing breach of trust between the Defense Minister and me has become public, preventing the normal continuation of our campaign management," Netanyahu said.
"In light of this, I have decided to end the Defense Minister's tenure. I have chosen to appoint Minister Israel Katz as his replacement."
Since Oct.7, 2023, the Israeli brutal military campaign on the Gaza Strip has killed at least 43,391 people, most of them women and children, with more than 102,347 others injured, according to the Palestinian health ministry's latest figures.
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