A Jordanian official said the monarch officially accepted the resignation of Samir Rifai, a wealthy politician and former court adviser, and asked Marouf Bakhit to form a new cabinet.
Demonstrators inspired by mass protests in Tunisia and Egypt had called for Rifai's dismissal.
"(Bakhit) is a former general and briefly ambassador to Israel who has been prime minister before. He's someone who would be seen as a safe pair of hands," said Rosemary Hollis, professor of Middle East policy studies at London's City University.
"I wouldn't see it as a sign of liberalisation. With his previous premiership, he talked the talk of reform but little actually happened," she said.
Under fire from an enraged public over high food prices, Rifai announced wage increases two weeks ago to civil servants and the military in an attempt to restore calm.
Protests have spread across Jordan in the last few weeks, with demonstrators blaming corruption spawned by free-market reforms for the plight of the country's poor.
Many Jordanians hold successive governments responsible for a prolonged recession and rising public debt that hit a record $15 billion this year in one of the Arab world's smallest economies, heavily dependent on foreign aid.
(Writing by Suleiman al-Khalidi, editing by Mark Trevelyan)
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