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President Yoweri Museveni dismisses Prime Minister Amama Mbabazi, who is widely expected to seek presidency in 2016.
Military exercises cancelled and visa restrictions imposed after country passes tough laws targeting gay community.
Government spokesman says Walter Reed Project in the capital Kampala has been "training youths in homosexuality".
Museveni says homosexuals are "mercenaries" and "prostitutes" as he signs law setting harsh penalties for gay practices.
Move follows failure of government and M23 to agree on wording of document to end the insurgency officially.

Ugandans have held their first multi-party election for a quarter century, overshadowed by opposition accusations of government fraud in a bid to extend its two-decade rule. 

Featured on Al Jazeera
At least 25 tax collectors have been killed since 2012 in Mogadishu, a city awash in weapons and abject poverty.
Tokyo government claims its homeless population has hit a record low, but analysts - and the homeless - beg to differ.
3D printers can cheaply construct homes and could soon be deployed to help victims of catastrophe rebuild their lives.
Lack of child protection laws means abandoned and orphaned kids rely heavily on the care of strangers.
 
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