Deputy Chief Minister Manish Sisodia announced the change on Saturday evening, claiming that Mr Mishra was removed due to issues in managing the city's water supply.
But not everyone is taking this explanation at its face value. Certainly not Mr Mishra, who is known to be close to Kumar Vishwas, the AAP leader on the verge of jumping the ship this week after being accused of trying to split the party. Mr Kejriwal had persuaded Kumar Vishwas to stay back but only after Amanatullah Khan, the lawmaker who had levelled the allegations, was suspended. Mr Kejriwal had hoped that he had bought peace.
Minutes before Mr Sisodia made the announcement, Mr Mishra - who is close to AAP leader Kumar Vishwas - tweeted that there will be a "massive expose on a water tanker scam tomorrow(Sunday)". Mr Mishra said he had already briefed the Chief Minister about the "explosive details" and would make it public.
Mr Mishra has alleged that his removal - the formal orders are yet to be issued - had a lot to do with his fresh attempt to unmask "big names" in the water tanker scam that was being probed by the Anti-Corruption Branch at the AAP government's request.
Minutes before Mr Sisodia made the announcement, Mr Mishra tweeted that there will be a "massive expose on a water tanker scam tomorrow(Sunday)". Mr Mishra said he had already briefed the Chief Minister about the "explosive details" and would go public at 11 am.
The first leak that Mr Kejriwal had sacked the water minister came soon after. Around the same time, Kumar Vishwas also put out a cryptic tweet. "I want to assure the country and party workers that we will continue to raise our voice against corruption, within and without, irrespective of what the outcome is," he wrote in Hindi.
As he took swipes at AAP leaders including the Chief Minister, Mr Mishra made it clear that he had no intention of quitting the party that he had been associated with right from the beginning. Instead, the minister said, he would fight within the party to clean up the trash.
This is the latest in a series of crises to hit AAP, which is reeling from three election defeats including the drubbing in the Delhi civic polls.
Though Kumar Vishwas, a popular Hindi poet and satirist, is a founder member of AAP he has held no top party posts and has only been responsible for overseas funding so far. As part of the truce this week, he was named to lead the party's campaign in Rajasthan.
There has been speculation periodically about Mr Vishwas' quitting AAP to join the BJP ever since he had praised Prime Minister Narendra Modi a few years ago. There was a influential section within the AAP government that felt Mr Kejriwal should have let him go, but the Chief Minister has been reluctant to go along with this view.