Russian President Vladimir Putin Tuesday fired his defence minister over a corruption scandal, the most dramatic change to the government since he returned for a third Kremlin term amid rising discontent.

Putin replaced defence minister Anatoly Serdyukov -- who had been implementing an unpopular but Kremlin-backed military reform -- with Moscow region governor and former emergencies minister Sergei Shoigu.

Many analysts said that the sacking of a top official who had enjoyed Putin's unconditional support was aimed at instilling fear in the elites as the Russian strongman struggles with the worst political crisis of his almost 13-year rule.

Putin said Serdyukov, one of three people in Russia with access to nuclear launch codes, had been relieved of his duties so that a thorough investigation can proceed into a suspected $100 million property scam at a defence ministry holding company.

"Taking into consideration the situation around the defence ministry I have made a decision to relieve defence minister Serdyukov of his post in order to create conditions for an objective investigation of all the issues," Putin said in televised remarks.

A former furniture salesman who rose to head the Russian tax authority, Serdyukov became the first civilian to serve as post-Soviet Russia's defence minister when he was appointed in 2007.

His lack of military credentials and controversial military reform programme earned him derision in the defence ministry as he tried to push through the army overhaul.

In the past Putin had repeatedly resisted calls from within the military for Serdyukov to leave his post, even though he is believed to have made powerful enemies in the government and the Kremlin administration.

Serdyukov is the son-in-law of Viktor Zubkov, a former Russian deputy prime minister and a long-time Putin ally.

"There are no indispensable people for Putin," a defense ministry source told AFP, adding that the military greeted Serdyukov's sacking with "moderate joy."

The dismissal is all the more dramatic because Putin is widely known for his aversion to high-profile sackings and Shoigu was only appointed to the key job of Moscow region governor earlier this year.

"Putin's Byzantine empire is beginning to live according to completely different laws than before," military analyst Alexander Golts wrote.

"This decision is very much in the spirit of Stalin," added Pavel Felgenhauer, a military commentator for opposition newspaper Novaya Gazeta.

"You need to keep the elites in fear," he told AFP.

"Putin has decided to turn Serdyukov into an example of the fight against 'elite' corruption," he added, noting he did not rule out that Serdyukov would be arrested and eventually prosecuted.

The Interfax news agency reported, citing the spokesman for the influential Investigative Committee, Vladimir Markin, that Serdyukov might be questioned as part of the ongoing probe.

Serdyukov's sacking came on the heels of a probe into a defence ministry holding company and reports that Serdyukov had left his wife for a woman at his ministry.

Russian investigators had on October 25 searched the offices of defence ministry holding company Rosoboronservis, in a highly unusual move after opening a criminal probe into a suspected $100 million property scam.

Compounding the embarrassment for Serdyukov was the fact that when investigators arrived at the home of one of the suspects last month they found none other than the defence chief himself, the pro-Kremlin lifenews.ru website reported.

The 33-year-old woman, the former head of the defence ministry's property department Yevgenia Vasilyeva, was living in a luxurious apartment and had an expensive collection of jewels which security forces confiscated.

The defence minister's sacking comes as the government is planning to dramatically ramp up military spending that experts say will come at the expense of financing education and medical care.

Putin said the new minister should be able to implement "grandiose plans to rearm the army and the fleet that have been put forward."

"You can be that person," Putin told Shoigu.

Shoigu is seen as one of Putin's closest friends and allies, serving as emergency situations minister from 1994-2012.