Egypt has told the Turkish ambassador to leave the country, a day after the Turkish leader called for ousted President Mohammed Morsi to be freed.
Relations with Ankara would be lowered to charge d'affaires, officials said.
On Friday, Turkish leader Recep Tayyip Erdogan repeated his criticism of the July overthrow of Mr Morsi and urged the Egyptian authorities to free him.
Egypt's foreign ministry accused Mr Erdogan of provocation and interfering in Egypt's internal affairs.
Responding to Cairo's decision to expel ambassador Huseyin Avni Botsali, Turkey also announced the downgrading of ties and barred the Egyptian ambassador, declaring him "persona non grata".
Turkey has been a vocal critic of the military overthrow of Mr Morsi, who is in prison awaiting trial on charges of inciting murder and violence.
He is one of thousands belonging to the Islamist Muslim Brotherhood who have been detained in a crackdown the interim authorities have portrayed as a struggle against "terrorism".
Hundreds of people have also been killed in clashes with security forces.
Mr Erdogan renewed his criticisms on Friday, condemning the violent dispersal of pro-Morsi protesters in August.
Egypt's Foreign Ministry spokesman Badr Abdelatty accused Mr Erdogan of "interfering in Egypt's internal affairs".
He said Turkey was "attempting to influence public opinion against Egyptian interests, supported meetings of organisations that seek to create instability in the country".
A bitter row over the August crackdown led both countries to recall their ambassadors.
Turkey's ambassador to Cairo returned in September, but the Egyptian ambassador to Turkey was never reinstalled.
Mr Erdogan, like Mr Morsi, has his roots in political Islam. Ankara and Istanbul have hosted a series of meetings of the international Muslim Brotherhood.