Spanish Prime Minister Mariano Rajoy has fired the Catalan government as part of emergency measures the Senate approved following the region's declaration of independence.
Mr Rajoy said he is dissolving the Catalan parliament and calling for a new regional election on December 21.
He was speaking after a special Cabinet meeting to discuss what measures to take in the wake of the Catalan parliament's announcement of secession earlier on Friday.
The firing of the regional leaders is likely to meet with fierce opposition in Catalonia, where thousands have been celebrating the independence declaration.
The Spanish government has been authorised to dismiss the regional government and curtail the Catalan parliament's powers.
Mr Rajoy said he is also firing the head of the Catalan regional police, shutting down Catalonia's foreign affairs department and dismissing its delegates in Brussels and Madrid.
He said "we never wanted to come to this point" and the aim is "to return (Catalonia) to normality and legality as soon as possible".
In a square outside the government palace in Barcelona, an announcer told the crowd about the moves by Mr Rajoy.
The news was greeted with loud jeers and whistles.
But the thousands who came to celebrate Catalonia's independence declaration did not let the Spanish response disrupt the festive mood.
A band took to the stage immediately after the announcement and the crowd once more began singing and dancing to the music.
The crowd in Sant Jaume Square shouted "we are not moving".
Catalonia's regional parliament has passed a motion to establish an independent Catalan Republic, prompting Spain's Senate to authorise the central government to take control of the region.
Catalan legislators voted to secede from Spain after an acrimonious debate that saw opposition legislators walk out in protest before the vote.
A majority of senators then gave prime minister Mariano Rajoy the go-ahead to apply unprecedented measures including sacking Catalan President Carles Puigdemont and his cabinet.
It also authorised him to curtail Catalan parliamentary powers.
Mr Rajoy immediately called for calm, tweeting: "I call on all Spaniards to remain calm. The rule of law will restore legality to Catalonia."
Mr Puigdemont called on fellow separatists to remain peaceful ahead of an expected crackdown by Spanish authorities.
Addressing a crowd of hundreds of supporters packing Catalonia's parliament building, he said: "In the days ahead we must keep to our values of pacifism and dignity. It's in our, in your hands to build the republic.
"Today the Parliament fulfilled the long-desired and fought-for step and culminated the mandate of the ballot boxes."
Those gathered then erupted into the Catalan anthem Els Segadors (The Reapers) and chants of "Liberty!"
The Parliament of Catalonia constitutes the Catalan Republic, as an independent, sovereign, democratic, social State under the rule of law pic.twitter.com/RW5xck7PYN
— Catalan Government (@catalangov) October 27, 2017
European Council president Donald Tusk said "nothing changes" for the European Union after Catalonia's parliament voted to declare independence, adding that Spain "remains our only interlocutor".
Mr Tusk wrote on Twitter: "I hope the Spanish government favours force of argument, not argument of force."
The independence bid has failed to attract support from governments in Europe.
Catalonia's regional parliament has passed a motion to establish an independent Catalan Republic.
Separatist legislators erupted in applause as the vote was approved with 70 votes in favour, 10 against and two blank ballots.
Most opposition members had left the chamber in protest moments before the vote.
Spain opposes the independence bid and the national government in Madrid is readying measures to take control of the north-eastern region.
Spanish prime minister Mariano Rajoy urged the country to remain calm minutes after the motion was passed.
Mr Rajoy made the appeal in a tweet, saying: "I call on all Spaniards to remain calm. The rule of law will restore legality to Catalonia."
The tweet came as the Senate in Madrid prepared to approve government proposals to take direct control of Catalonia.
A majority of senators are expected to give Mr Rajoy the go-ahead to apply unprecedented measures including sacking Catalan President Carles Puigdemont and his cabinet.
Thousands of people watched the Catalan voting process and the counting live on big screens outside Catalonia's parliament in Barcelona, and cheered and danced after the motion was passed.
Mr Puigdemont and vice president Oriol Junqueras exchanged congratulatory embraces and handshakes after the vote.