New Zealand's Prime Minister, Helen Clark, has given a statement to parliament, saying Fiji's president Ratu Josefa Iloilo had sanctioned Mr Qarase's removal.
She sais she had been advised that the president of Fiji has acted outside his constitutional powers and supported the removal of the democratic prime minister by the military,"
But Miss Clarke said Mr Qarase was refusing to resign in the face of "huge threats and intimidation".
The FijiLive website is reporting that President Ratu Josefa Iloilo has signed an order dissolving Parliament and has given the green light to Fiji's military to take over the running of the country.
He is said to have given the go-ahead in a meeting earlier this morning with army commander Commodore Frank Bainimarama and his legal team, citing the doctrine of neccessity.
Troops led by the military commander Commodore Frank Bainimarama took control of Suva, setting up roadblocks and at one stage surrounding the home of the prime minister Laisenia Qarase.
There was confusion in the city about who was in control.
Mr Qarase, holed up in his home with a handful of ministers, admitted he was effectively isolated.
He said he expected the military to detain him.
The Australian Prime Minister, John Howard has condemned events in Fiji.
The government has signalled it plans to suspend defence ties with Fiji and stop the military and members of any interim government visiting Australia in response to the coup.
Mr Howard said Mr Qarase had behaved with great courage.
He told the AAP news agency that id he wished he could say the same thing about the president of Fiji, who does not appear to have upheld the constitution of that country.
Mr Howard said he exhorted those responsible for this coup not to do any physical harm to anybody in the properly elected government of Fiji.
Mr Qarase said he was not immediately aware that parliament had been dissolved, but he said any such action would be illegal and any government put in place would illegal.