The dismissal, announced to Itar-Tass by the presidential press service, ends a nine-month battle between Lebed and Moscow's Defense Ministry over the status and eventual withdrawal of the 14th Army, which the 45-year-old general has commanded since 1992.
No one was immediately available in the Kremlin to confirm the news. But Colonel Mikhail Bergman, a Lebed aide in Tiraspol, capital of the breakaway territory of Transdnestr in Moldova, said the general was still in Moscow. Interfax reported that Lebed planned to fly to Tiraspol on Thursday.
Bergman expressed disgust at Yeltsin's decision: "This means that fascism is coming and that [Vladimir] Zhirinovsky has won," he said, referring to the leader of the ultranationalist Liberal Democratic Party.
Yeltsin signed a decree dismissing Lebed and a second one appointing Major General Valery Yevnevich to take over as head of the 14th Army, Interfax said.
Lebed abruptly submitted his resignation two weeks ago after Defense Minister Pavel Grachev ordered him to reduce the 14th Army as part of the plan to withdraw it within three years. Grachev, whose dislike for Lebed is well known, accepted his resignation but Yeltsin, as commander in chief, was to have the final say.
Yeltsin refused to confirm the resignation last week and appeared to override his defense minister when he ordered a panel of top officials to study the issues behind the Lebed's request to go.
Yeltsin's acceptance of the resignation Wednesday appears to support Grachev's position and to give the go-ahead to reduce the Russian presence in Moldova as agreed with its government. Lebed made a stand against the plans for reduction last August and won a small victory at the time, retaining his command and the status of 14th Army for his men.
Leaders in both Moldova and Transdnestr have since voiced support for Lebed's presence as a key to stability in the region and in recent months called for him to stay. Military analysts have meanwhile warned that Lebed's departure could destroy the morale of the Russian soldiers and so jeopardize their control of the situation.
Lebed, meanwhile, has been widely touted as a potential presidential challenger to Yeltsin. He recently joined the ruling body of a small nationalist political party but has refused to be drawn on his political ambitions.
His comments in recent months have become more political and outspoken. He has attracted nationalist feelings in the army with his call for retaining a strong army presence in the separatist region of Transdnestr to prevent further fighting and to stop the large stock of Russian arms getting into the wrong hands.
His tough action to put down the civil war in the area in 1992 and subsequent criticism of politicians made him a hugely popular figure within the Russian military.
He has used his profile to attack incompetence and corruption among army brass and has also criticized the handling of the war in the breakaway republic of Chechnya. Early on in the war he said he would only serve in Chechnya to command a withdrawal of Russian forces.
On another occasion said he would only go to Chechnya if he could head a battalion made up of the sons of government leaders.
-- Leonid Bershidsky contributed to this report
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