President Kais Saied announced he would take charge with help from a new prime minister, saying he intended to bring calm to the country.
But opponents branded his move a coup.
“We have taken these decisions… until social peace returns to Tunisia and until we save the state,” Mr Saied said in a televised address after an emergency security meeting at his palace.
Late on Sunday night, protesters erupted with celebrations at the news Prime Minister Hichem Mechichi had been sacked. President Saied joined crowds in the capital Tunis.
Thousands of people had demonstrated against the ruling party in Tunis and other cities, shouting “Get out!”, and calling for parliament to be dissolved.
Security forces blocked off parliament and streets around the central Avenue Bourguiba, the centre of anti-government protests during Tunisia’s 2011 revolution.
Police fired tear gas at protesters and arrested several people, with clashes breaking out in several other towns.
Protesters stormed the offices of the governing Ennahdha party, smashing computers and setting fire to its local headquarters in Touzeur.
The party denounced the attack, blaming “criminal gangs” who were trying to “seed chaos and destruction”.
President Saied vowed to respond to further violence with military force.
“I warn any who think of resorting to weapons… and whoever shoots a bullet, the armed forces will respond with bullets,” he said.
He said the constitution allowed him to suspend parliament if it is in “imminent danger”.
But Tunisian Parliament Speaker Rached Ghannouchi accused the president of mounting “a coup against the revolution and constitution”.
“We consider the institutions to be still standing and supporters of Ennahda and the Tunisian people will defend the revolution,” Mr Ghannouchi, Ennahda’s leader, told Reuters news agency.
Ten years ago, the Tunisian revolution ushered in democracy and triggered the Arab Spring revolts across the region.
But hopes that this would bring more jobs and opportunities have been disappointed.
A decade on, Tunisia is battling a deep economic crisis and one of Africa’s worst coronavirus outbreaks.
Cases have been rising sharply in recent weeks, putting further pressure on the faltering economy.
Prime Minister Hichem Mechichi sacked the health minister last week, but this has done little to ease people’s anger. (Courtesy BBC)