In a party release in Chennai, Mr Dinkaran, fighting to assert his supremacy in the wake of recent merger of two AIADMK factions, announced Mr Palaniswami was relieved from his post of Salem Suburban District Secretary effective today.
Mr Palaniswami is also the party's headquarters secretary but there is no mention about it in Mr Dinakaran's release.
Mr Dinakaran has been sacking several party functionaries, especially district secretaries, a key post in the Dravidian parties' hierarchy, and replacing them with his supporters ever since the merger of AIADMK factions led by Mr Palaniswami and former chief minister O Panneerselvam on August 21.
After the merger, it has been announced that steps would be taken to expel jailed party general secretary and TTV Dinakaran's aunt VK Sasikala from the party.
The ruling establishment leaders have also been maintaining that Mr Dinakaran has no powers to carry out the changes and questioned his re-induction into the party by VK Sasikala.
With his latest action, Mr Dinakaran seeks to convey that he is determined to take on even the Chief Minister for their opposition to Ms Sasikala.
He said Salem Suburban District Secretary and former MLA SK Selvam will replace Mr Palaniswami as the district secretary. "Party cadres are asked to extend their cooperation to Selvam," he said.
Mr Dinakaran, sidelined by the Palainiswami camp in April last, added that the announcement was being made with the "approval" of Ms Sasikala, who is serving her jail term in a Bengaluru prison in a corruption case.
Mr Dinakaran had yesterday relieved Government Chief Whip S Rajendran from the post of Ariyalur District Secretary days after he wrote to Assembly Speaker P Dhanapal seeking action against 19 MLAs loyal to him.
The MLAs had last week met Governor C Vidyasagar Rao and expressed their lack of confidence in Mr Palaniswami and sought to replace him, triggering demands by opposition parties, including DMK, for a direction to the Chief Minister to prove his majority in the assembly.
Later, two more AIADMK MLAs have supported the pro-Dinakaran group, boosting its strength to 21 and all of them are now camping in a star hotel in Puducherry.