A Saudi official on Thursday denied a New York Times report that Prince Mohammed bin Nayef has been confined to his palace and barred from travelling abroad after he was replaced by the king's son as next in line to the throne.

Mohammed bin Nayef, a veteran interior minister who was admired in Washington for quashing an Al-Qaida insurgency in the kingdom between 2003 and 2006, was relieved of all his duties a week ago.

In his place as crown prince, King Salman appointed his son Mohammed bin Salman, who also serves as defense minister and leads an ambitious reform agenda to end Saudi Arabia's over-reliance on oil.

Open gallery view Mohammed bin Salman, newly appointed as crown prince, left, kisses the hand of Prince Mohammed bin Nayef, June 21, 2017. Credit: /AP

The New York Times, citing four current and former American officials and Saudis close to the royal family, said that Mohammed bin Nayef has been "barred from leaving the kingdom and confined to his palace" in the Red Sea city of Jeddah.

"It's not true, 100 percent," the official told Reuters, responding to a question on the New York Times report, without giving any further details.

Saudi state media, eager to show the change was going smoothly, repeatedly broadcast footage of the young Mohammed bin Salman kissing the hand of his older cousin, Mohammed bin Nayef, as he offered congratulations.

Mohammed bin Salman's promotion ended two years of speculation about a behind-the-scenes rivalry near the pinnacle of royal power, but analysts said he still has to win over powerful relatives, clerics and tribesmen.

The young prince was little known to Saudis and outsiders before Salman became king in January 2015. He had previously been in charge of his father’s royal court when Salman was the crown prince, according to AP reports.

The Saudi monarch, who holds near absolute powers, quickly awarded his son expansive powers to the surprise of many within the royal family who are more senior and more experienced than Mohammed bin Salman, also known by his initials MBS.