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Morsy, a Western-educated Islamist elected a year ago, "did not achieve the goals of the people" and failed to meet the generals' demands that he share power with his opposition, Egypt's top military officer, Gen. Abdel-Fatah El-Sisi, said in a televised speech to the nation Wednesday.
Adly Mansour, head of the country's Supreme Constitutional Court, replaces Morsy as Egypt's interim president, El-Sisi said.
Mansour had become head of the court just two days earlier following a decree last month by Morsy. He was sworn in as interim president in Cairo on Thursday.
Speaking at the ceremony, Mansour said that the Egyptian people had given him the authority "to amend and correct" the revolution in 2011 that brought down the former ruler Hosni Mubarak.
New elections will be held at an unspecified date, and Mansour will have the power to issue constitutional declarations in the meantime, according to El-Sisi.
The military has not so far publicly commented on Morsy's whereabouts. But Muslim Brotherhood spokesman Gehad El-Haddad told CNN the deposed president was under "house arrest" at the presidential Republican Guard headquarters in Cairo.
The state-run Middle East News Agency said the two top leaders of the Muslim Brotherhood's political party had been taken into custody, and another state-run outlet, the newspaper Al-Ahram, said another 300 were being sought by police.
The Egyptian military has dominated the country for six decades and took direct power for a year and a half after the ouster of Mubarak.
As demonstrations swelled this week against Morsy, who opponents have accused of authoritarianism and forcing through a conservative agenda, the military on Monday gave him 48 hours to order reforms.
Morsy's approval ratings plummeted after his election in June 2012 as his government has failed to keep order or revive Egypt's economy.
As the deadline neared Wednesday, he offered to form an interim coalition government to oversee parliamentary elections and revise the constitution that was enacted in January. But that failed to satisfy the generals.
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