Reja, 68, had taken charge of training sessions this week even though Petkovic had said that he been told nothing in writing by Lazio and still considered himself to be their coach.
Petkovic, who took over at the start of last season, signed a deal just before Christmas to take charge of the Swiss national side from next season.
Even though he will not begin his new role until after his contract with Lazio has expired in June, club president Claudio Lotito was still reported by Italian media to be angry over the move.
"Lazio communicates that it has terminated the employment contract with Vladimir Petkovic for just cause following the conclusion of a disciplinary procedure and (after hearing the) justification of the interested parties," said the club in a statement.
Switzerland announced on December 23 that Petkovic had agreed replace Ottmar Hitzfeld who will leave after the World Cup in Brazil.
The Bosnia-born coach led Lazio to seventh place in Serie A last season plus the Coppa Italia title with a win over neighbours AS Roma in the final.
This season has been less impressive and they are 10th in the table with 20 points from 17 games and Petkovic's future had been the subject of speculation before the Swiss announcement.
He insists this broke no rules, as his contract with Lazio was due to expire in June and his job as Swiss manager won’t start until July 2014.
The Biancocelesti had to sack Petkovic before officially signing new boss Edy Reja so he can sit on the bench against Inter on Monday.
“We received notice of the sacking for just cause. We’ll impound the decision in the opportune legal arenas, because we consider it profoundly unjust,” Petkovic’s lawyer Paco D’Onofrio told Sky Sport Italia.
“The statement released by Lazio is unique, as it doesn’t actually indicate the rule he is supposed to have broken during negotiations with the Swiss Federation. President of the Coaches’ Association Renzo Ulivieri also stated this week that Petkovic did not violate any regulation.
“No rule forbids a Coach from reaching an agreement with others when his contract is due to expire. Besides, Petkovic signed for a national team and not a club rival of Lazio.”
The sacking arrived after attempts to terminate the contract by mutual consent, as it’s reported Lazio offered only €100,000 to end their rapport early compared to the €600,000 wages he’d earn until June 30.
“We tried to find a mutual consent solution so as not to damage the Coach’s image, as we could not accept people claiming he had broken the rules. Any agreement between us had to be based on making that clear.
“The Coach confirmed his thoughts were only for Lazio and its fans so they can finish the season as well as possible. Up until this morning, Petkovic was still the Lazio Coach. We would’ve been happy to end this rapport with a handshake and a relaxed atmosphere, but we could not accept aspersions cast on Petkovic’s behaviour.”
Reja has coached around 20 clubs since starting his career in 1980, including Napoli, Genoa, Torino and Cagliari. He was previously in charge at Lazio for two years before he resigned and was replaced by Petkovic following the 2011/12 season.
Reja's first game in charge will be at home to Inter Milan on Monday. Lazio are the fifth Serie A side to change coach this season following Catania, Sampdoria, Genoa and Chievo.
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