Faye's decision dissolves the government, dismissing all ministers, according to the statement read by Oumar Samba Ba, secretary general of Faye's office.
"The members of the outgoing government are responsible for handling current affairs," Ba added.
The move announced on Friday night, local time, follows months of mounting strains between the two allies-turned-rivals.
Sonko, a charismatic figure with a large youth following, had backed Faye in the 2024 election after being barred from running himself due to a defamation conviction.
"Tonight I will sleep with a light heart in the Keur Gorgui neighbourhood," Sonko posted on social media after the news was announced, referring to his private residence.
In March, he had signalled a possible break, saying he would be willing to take his Pastef party out of the government and return to opposition if Faye departed from the party's agenda, fuelling speculation of an irresolvable power struggle between the two men.
Among the anti-establishment, pan-Africanist prime minister's signature initiatives was an audit of Senegal's resource deals, including those governing its emerging oil and gas sector.
In March, Sonko declared a BP gas contract for the Greater Tortue Ahmeyim project unfair and revoked some 71 mining licences.
He promised renegotiating oil and gas contracts would lower domestic energy prices and boost the economy, helping rebuild Senegal's battered finances.
The political split comes as Senegal faces mounting economic pressure. The International Monetary Fund froze its $US1.8 billion ($A2.5 billion) lending program with Senegal following the discovery of misreported debt, which led it to peg the country's end-2024 debt level at 132 per cent of its economic output.
Last November, Sonko came out strongly against restructuring Senegal's debt, estimated at $US13 billion ($A18 billion), saying the IMF was pushing for such a move.
Faye has not been as vocal about the debt issue.
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