Fred Sevele, the minister of labour and one of a handful of politicians elected by popular vote, was appointed interim prime minister on Monday to replace Prince 'Ulukalala Lavaka Ata, the son of King Taufa'ahau Tupou IV.
A statement from the royal family's Lord Chamberlain gave no reason for the resignation.
Demonstrators demanding democracy in the South Pacific's last monarchy urged the 87-year-old king last year to sack the prime minister and all 14 of his ministers.
Pesi Fonua, editor of online magazine Matangi Tonga Online, said: "It didn't come as a surprise as it has been rumoured for several weeks that Fred Sevele was going to be prime minister.
"It's a positive move because any political move has to be packaged together with some economic recovery programme and we now have somebody with experience in business."
In August, public servants staged a six-week strike over pay and hospitals, schools, rubbish collection and other services ground to a halt.
Hundreds of protesting students were arrested during the strike, which at times erupted into violence, with government cars and buildings burnt.
Public protest and violence are virtually unheard of in the small kingdom, where the royal family controls a semi-feudal political system and owns key businesses.
In May, an estimated 10,000 marched demanding democracy and public ownership of key assets after the country's sole power company, owned by the heir to the throne, increased prices.
Tonga has a population of about 105,000 spread over 170 coral islands 2000km north of New Zealand.