Egypt says it has asked Turkey's ambassador to leave and accused the country of backing unnamed organisations bent on spreading instability.
Saturday's decision to expel Huseyin Avni Botsali, the Turkish ambassador, apparently follows remarks made by Recep Tayyip Erdogan, Turkish prime minister, that Egypt's government regards as "provocative".
Turkey has emerged as one of the fiercest international critics of the overthrow of Egypt's Islamist President Mohamed Morsi in July, calling it an "unacceptable coup".
Since Morsi's election to the president's office in June 2012, his Muslim Brotherhood organisation has forged close ties with the governing AK Party of Erdogan.
Turkey was "attempting to influence public opinion against Egyptian interests, supported meetings of organisations that seek to create instability in the country", Badr Abdelatty, Egyptian Foreign Ministry spokesman, said on Saturday.
Shortly after the Egyptian announcement, Turkey pledged to retaliate.
"We will take steps in reciprocity after comprehensive consultations with the Turkish ambassador," Levent Gumrukcu, Foreign Ministry spokesman, told AFP news agency.
Abdelatty said the Egyptian government took three decisions on Saturday concerning its diplomatic ties with Turkey.
"First to expel the Turkish ambassador and downgrade our ties to the level of charge d'affaires, second to declare the Turkish ambassador persona non grata and third we will not send our ambassador to Turkey," Abdelatty told AFP news agency.
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He said the decisions were taken after Erdogan made remarks in Russia on Thursday that were "provocative and interfering in Egypt's internal affairs".
Erdogan condemned the crackdown by Egyptian security forces on supporters of Morsi in Cairo on August 14.
Al Jazeera's Hoda Abdel-Hamid, reporting from Cairo on Saturday, said: "One of the issues you hear here among many Egyptians is Erdogan using the four-finger salute."
Erdogan says he uses the salute "because it is a sign of freedom", she said, but he has made statements to the Turkish media that has angered the Egyptian Foreign Ministry.
Relations have been strained since the overthrow of Morsi and, in particular, since the crackdown on his supporters in Cairo's Rabaa al-Adawiya and Nahda squares.
At least 627 people were killed in Rabaa al-Adawiya square itself on August 14, according to Egyptian officials, when security forces broke up a sit-in of Morsi's supporters.
The following day, Cairo and Ankara announced they were recalling their respective ambassadors for consultations.
But Erdogan said on September 4 that Botsali would return to Cairo, while Egypt's envoy was still to return to his post in Ankara.
Morsi was removed by the army on July 3 following days of mass protests by millions against his turbulent year-long rule.
Millions of Egyptians took to the streets demanding Morsi's resignation, blaming him for ruining an already dilapidated economy, monopolising power and working solely to fulfil the agendas of the Muslim Brotherhood.