Rebel soldiers have seized the military's headquarters and replaced Papua New Guinea's top defence official with their own leader, who gave prime minister Peter O'Neill a week to step aside for his ousted predecessor.
The self-proclaimed new leader of the country's defence forces, retired Colonel Yaura Sasa, insisted he was not mounting a coup.
But he warned that the military will take unspecified action unless Mr O'Neill stands down and former prime minister Sir Michael Somare, is reinstated, as the national Supreme Court ordered last month.
"Both Sir Michael Somare and O'Neill have seven days to implement the Supreme Court's orders to resolve the current political impasse or I will be forced to take actions to uphold the integrity of the Constitution," Col Sasa told reporters in Port Moresby, the capital.
The new crisis comes during a turbulent period for the South Pacific's most populous island nation, where both Mr O'Neill and Mr Somare claim to be the rightful prime minister.
Between 12 and 20 soldiers overpowered guards at the Taurama Barracks in Port Moresby before dawn, Australian Broadcasting Corp reported, citing an unnamed senior source in the Papua New Guinea defence force.
The rebel soldiers then moved to the military headquarters at Murray Barracks and placed the head of the Papua New Guinea Defence Force, Brigadier General Francis Agwi, under house arrest. There were no reports of bloodshed.
Col Sasa, who last served as Papua New Guinea's defence attache to Indonesia before retiring from the military, told reporters he had been legitimately appointed defence chief by Mr Somare.
Mr O'Neill had told Australia - Papua New Guinea's former colonial master and main provider of foreign aid - that "authorities were taking steps to manage the situation", Australia's Department of Foreign Affairs and Trade said.
Mr O'Neill was expected to hold a press conference later.