Political sources earlier said Abdullah had summoned Mulki for an audience in the king's palace.
Government-linked media said Education Minister Omar Razzaz, a Harvard-educated reformer, has been tapped as Mulki's successor, though the choice was not officially confirmed by Monday evening.
Earlier this year, Jordanians demanded the removal of bread subsidies and protested a sales tax hike.
The legislative proposal is yet to be approved by the country's parliament.
Protesters have called on Prime Minister Hani Mulki to step down, vowing they will not "kneel", earning support from trade unions as well as a majority of MPs opposed to the new taxation.
Hundreds of Jordanians demonstrated in the capital Amman for a third consecutive day on Saturday against price hikes and an income tax draft law driven by International Monetary Fund recommendations to slash its public debt.
The cost of fuel has increased five times in 2018, and electricity bills have shot up to 55 percent.
"The income tax was just the trigger that just brought everything to the surface and united many people".
Last month, the Jordanian government introduced an income tax bill aimed at widening the tax base, increasing tax brackets and penalizing tax evaders. Thousands of Jordanians took to the streets of capital Amman and main provincial towns again on Sunday, extending days of protests that have shaken Jordan, a staunch US ally that has remained stable through years of turmoil in the region.
They were largely spontaneous, drawing many young people and members of the middle class, rather than being organized by traditional opposition groups such as the Muslim Brotherhood.
Overnight, protesters outside Mulki's office shouted slogans including "the ones raising prices want to burn the country" and "this Jordan is our Jordan, Mulki should leave".
The senate convened hours after protests ended Sunday to discuss "ways of dealing with draft law.in the interest of all parties", Jordan's official Petra news agency said.
Hundreds of thousands of Jordanians had taken to the streets in opposition to a proposed tax hike in what became the largest protests the country had seen in years. "We came with a request to withdraw the law and we heard something else", Ali al Abous, the head of the association said.
According to official estimates, 18.5 percent of Jordan's population of 9.5 million is unemployed, while 20 percent are on the brink of poverty.
Incomes in Jordan have stagnated for years, as prices have soared.
Amman is the most expensive Arab city to live in, according to a recent report published by The Economist.
Jordan's economy has struggled to grow under chronic deficits as private foreign capital and aid flows have slipped.
The loan, meant to support economic and financial reforms, has the long-term objective of reducing Jordan's public debt from about 94 percent of GDP to 77 percent by 2021.