The news pushed the shares 12p lower to 527p.
North West has suffered from a history of boardroom turbulence. Bob Ferguson, who will temporarily run the non-regulated businesses, is the third finance director since privatisation in 1989.
North West gave no reasons for Mr Thian's departure, but speculation centred on either policy differences over diversification strategy or a personality clash with the group's new chairman, Sir Desmond Pitcher.
But it is understood the board decided that a change of management style was necessary and suggested that Mr Thian had been reluctant to cede more autonomy to the subsidiaries as the group had grown.
There was also a feeling that there was a need for consolidation in the non-regulated businesses after a period of rapid growth.
Mr Thian had a reputation as an autocratic and combative manager, who worked long hours and demanded a great deal from subordinates. It is believed that he did not clash singly with Sir Desmond, but that he had difficult relations with several board colleagues.
North West has diversified into process and environmental engineering and contract management in water and sewerage. It has recently won several large contracts to design and operate water and sewerage works in countries such as Mexico and Thailand.
Sir Desmond, who became chairman in April, is to assume overall responsibility for the group's day-to-day operations pending the appointment of a new chief executive.
Derek Green, managing director of the regulated water business, and Mr Ferguson will report directly to Sir Desmond, who was formerly chief executive of Littlewoods and has been a non-executive director of North West since 1990.
The company said its policy remained unchanged, but some observers said the board was split over the diversification strategy.
Mr Thian, who joined the company in 1990, shortly after privatisation, is likely to receive a substantial pay-off. His basic salary of pounds 199,000 last year was augmented by pension contributions of pounds 29,000 and a pounds 56,000 bonus. He is negotiating, via his lawyers, over the settlement of his three-year rolling contract.
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