The government confirmed that Ishrat ul Ebad, 53, has been replaced by former chief justice of Pakistan Justice Saeeduz Zaman Siddiqui as the Governor of Sindh.
Siddiqui was among the aspiring candidates for the post of President in 2003 and 2008.
The decision comes just one day after it emerged in the Pakistan media that the warring factions of the Mutthaida Qaumi Movement (MQM), which has a strong presence in Sindh, had approached former army chief Lt General (retd) Musharraf to head a combined MQM.
Political analysts commented that the move to ditch Ebad perhaps came after rumors that he was behind the move to unify the MQM under the leadership of Musharraf.
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Meanwhile, Justice Siddiqui told media that he had accepted the post and the government would issue a notification soon.
"My top priority is going to be restoration of law and order in Karachi," he said.
Karachi, Pakistan's biggest city and financial hub, has been hit by sectarian violence, target killings, terrorism and widespread street crimes since the last few decades and the central government in October 2014 launched a operation clean-up by paramilitary Rangers which has been accused by the MQM of victimising and getting involved in politics.
He said Ebad was removed due to "recent controversies".
Ebad, a former leader of the MQM students wing and a former MPA who won on a MQM ticket in 1990, has held onto his post despite growing pressure from the Sindh government to replace him.
He was also considered very close to former MQM chief Altaf Hussain who resigned recently.