She has been dumped after she and her husband Etuate Lavulavu were charged with using forged documents and obtaining credit by false pretences in relation to the Unuaki 'o Tonga Royal Institute that they had set up.
Ms Lavulavu was arrested five weeks ago and a spokesman for the prime minister, Lopeti Senituli, said the government had been waiting for her to voluntarily step aside.
He said Mr Pohiva would have returned her to Cabinet if she had stood down and then been found innocent.
"That is what he had been hoping he would be able to do, if she had resigned voluntarily," Mr Lopeti explained.
"And that is w y he kept deferring his decision until now. And she had refused to do that. She had refused to resign voluntarily. And as far as the question you raise the answer is no, he is not going to bring her back into Cabinet."
Mr Pohiva informed the King of the sacking but Mrs Lavulavu's successor had not been announced.
The Lavulavus are charged with three counts each of knowingly dealing with forged documents and three counts of obtaining credit by false pretences.
This relates to a number of irregularities in an audit of the 'Unuaki 'o Tonga Royal Institute in 2016.
They appeared in the lower court in March and their case was adjourned to May 28.
'Etuate Lavulavu preceded his wife in her Vava'u seat but was fired last term after being found guilty of bribery.