Ray Nottage and Claire Bath supported the idea of merging Dorset's nine councils into two unitary authorities.
But two weeks ago the majority of council members voted against the idea.
David Flagg was elected leader of the council following the no-confidence vote at a private meeting of the Conservative group on Monday evening.
Mr Nottage said: "I had already made it clear I would not be standing as leader at the next AGM and there was a difference of opinion in terms of what I think should happen in a local government reorganisation.
"I lost by one vote. I'm extraordinarily disappointed that they've been unable to understand the consequences of the vote against the reorganisation because it's so patently obvious that the service levels are going to collapse with the tsunami of costs which are coming on and the current financial situation of the county.
"I think there is a considerable lack of understanding of the seriousness of the position we are in here in Dorset."
The proposed reorganisation would see Bournemouth, Poole and Christchurch combine into a single authority, with the rest of the county forming a second unitary council.
The two unitary plan was rejected by councillors at Christchurch, Purbeck and East Dorset but leaders of the remaining six councils that voted in favour of the proposal have written to the government to express their support of the idea.
East Dorset leader Spencer Flower has written to the government urging it not to force through the merger.
Christchurch Borough Council's leader and deputy have been ousted by their colleagues after a vote of no confidence.