Andrei Illarionov has often sharply contradicted Mr Putin's ministers

Economic adviser Andrei Illarionov said Russia was no longer politically free but run by state corporations acting in their own interests.

"I did not sign a contract with such a state," Mr Illarionov told reporters.

He had been the most vocal critic in the corridors of Russian power for some time, BBC correspondents say.

His remarks are seen by some experts as potentially embarrassing for Mr Putin, as Russia prepares to take over presidency of the G8 club of industrialised nations later this week.

Mr Putin's office said the president had signed a decree relieving Mr Illarionov of his post, and made no further comment.

'Impossible to remain'

"It is one thing to work in a country that is partly free. It is another thing when the political system has changed, and the country has stopped being free and democratic," Mr Illarionov told reporters in Moscow.

He said that "therefore it is absolutely impossible to remain" in his post.

Mr Illarionov added that Russia's economic policy and the economic model of the state had changed.

Mr Illarionov was sidelined by the president last year

He also said: "Until not long ago no-one put any limits on me expressing my point of view. Now the situation has changed."

Viktor Chernomyrdin, ambassador to Ukraine and a former Russian prime minister, dismissed Mr Illarionov's criticism of the government as groundless.

"There was so much malice in him, he was being overly negative," he is quoted by Russia's Interfax news agency as saying. "It was a mistake to keep him in the Kremlin for so long."

Analysts quoted by the AFP news agency say Mr Illarionov had already lost much of his influence on the Kremlin but was kept on as "window dressing" to ease Western concerns about growing state control over the economy.

Mr Illarionov has recently criticised government economic policy with such gusto that he sounded more like the Kremlin's arch opponent than its employee, the BBC's Steve Rosenberg in Moscow says.

A year ago, he condemned the Russian authorities attack on the giant Yukos as the swindle of the year, our correspondent says.

The Kremlin took away some of his duties, like his role as Russia's representative to the G8, sidelining the respected economist.