East Timor's president, Xanana Gusmao, has asked Prime Minister Mari Alkatiri to resign, citing a lack of trust in the leader.
East Timor officials say the president sent a letter to Mr. Alkatiri on Tuesday demanding his resignation.
A rebel leader, Vincente de Concecao, has accused Mr. Alkatiri of arming his group to eliminate the prime minister's political opponents.
East Timor's prosecutor-general says there is no evidence linking Mr. Alkatiri to the alleged plot.
But the prime minister suffered a blow Wednesday when his ally, former Interior Minister Rogerio Lobato, was placed under house arrest on charges of supplying weapons to the rebels.
Mr. Alkatiri was already battling waning public support when the scandal broke. He has been criticized for firing 600 disgruntled soldiers in March, sparking the worst violence to hit East Timor since the country's fight for independence in 1999.
Clashes involving military units, former soldiers and rival gangs terrorized civilians over the past months. The violence killed at least 30 people and forced tens of thousands to flee their homes.
The United Nations Security Council voted unanimously Tuesday to extend the U.N. political mission to East Timor by two months, to August 20, in light of the recent wave of violence.
Australian peacekeeping troops have surrounded Lobato's residence Wednesday, placing him under virtual house arrest.
Some information for this report was provided by AP and Reuters.