The collapse comes just weeks before a presidential election and amid controversy over the country's nominee for EU commissioner, according to presstv.ir.
Prime Minister Viorica Dancila lost her parliamentary majority in August when the junior coalition partner of her Social Democrats (PSD) withdrew support, citing major disagreements.
That followed hard on the heels of shock losses for the PSD -- Romania's biggest party -- in May's European Parliament elections and the jailing of its once all-powerful leader, Liviu Dragnea, on corruption charges.
A total of 238 MPs in the 465-seat parliament voted in favor of the motion against Dancila's government, clearing the way for President Klaus Iohannis to name a new prime minister.
"I leave with a clear conscience of having accomplished my duty," Dancila, 55, said after the vote.
Before the vote, opposition lawmaker Raluca Turcan denounced Dancila's "political patronage" and "lies" to ensure her government's survival.
Brussels watching closely
"This is the last day when we are addressing an illegitimate prime minister who has trampled on Romanians' expectations to move faster toward Europe," Turcan said.
Dancila had lobbied lawmakers until the last moment to back her.
She had instructed her own party lawmakers to abstain from voting to prevent possible "betrayals" and tried to win support, promising to pay local communities 300 million euros ($330 million) this Friday to make sure their MPs back her.
Lawmakers likely to change sides had also been offered public service posts and spots on party lists for next year's legislative elections.
The result of the vote was being eagerly awaited in Brussels after Dancila's candidate for EU commissioner was rejected. Newly-elected European Commission head, Ursula von der Leyen, has requested a replacement.
Dancila -- whose PSD has been in power since late 2016 but has seen massive protests over controversial judicial reforms -- is also due to run in presidential elections with the first round scheduled for November 10.
Incumbent center-right President Iohannis already looks set to be re-elected for a second term, and the collapse of Dancila's government will weaken her chances even further.
Iohannis will now consult parties before appointing a new prime minister to run the poor, corruption-plagued EU member until legislative elections scheduled for the end of next year.
"This government must go. A new government that will ensure an orderly transition until the next legislative elections will be formed," Iohannis, a vocal PSD critic, said late Wednesday.
Undermined by internal dissent, the opposition has so far failed to agree on an alternative candidate to Dancila.
One option is former transport minister Ludovic Orban, leader of the Liberals, which Iohannis used to head, but he enjoys far from unanimous backing.
The new government will have the delicate task of writing the budget for 2020, complicated by an explosion of public spending in recent months as the PSD struggles to stay in power.
The International Monetary Fund has already warned that Romania risks surpassing the three percent public deficit ceiling imposed by the EU, urging Bucharest to give up on a PSD promise of doubling pensions by 2022.