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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. 

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Muslim volunteers face questioning and threat of arrest, while aid has been disrupted or blocked, charities say.
Six months on, outrage and sorrow over the mass schoolgirl abduction has disappeared - except for families in Nigeria.
ISIL combatants seeking an 'exit strategy' from Mideast conflict need positive reinforcement back home, analysts say.
European nation hit by a wave of Islamophobia as many young fighters join ISIL in Syria and Iraq.
 
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