Journalist Jamal Khashoggi died after a fight in the Saudi consulate in Istanbul, the country’s state TV reported quoting an initial probe.
It said deputy intelligence chief Ahmad al-Assiri and Saud al-Qahtani, senior aide to Crown Prince Mohammed Bin Salman, were dismissed over the affair.
The news bulletin said 18 Saudi nationals have now been detained as part of the continuing probe.
This is the first time the kingdom has admitted Mr Khashoggi has died.
Saudi King Salman has also reportedly ordered the formation of a ministerial committee, headed by Crown Prince Mohammed, to restructure the intelligence services.
The journalist was last seen entering the Saudi consulate in Istanbul on 2 October, to pick up paperwork that would allow him to marry his fiancée Hatice Cengiz.
Reports on Saudi state media followed shortly after King Salman spoke on the phone to Turkey’s President Recep Tayyip Erdogan about the case.
The pair exchanged information and agreed to continue cooperation into the investigation, Turkish presidential sources said.
Saudi Arabia reportedly acted on information provided by Turkish authorities as part of its inquiry, investigating a number of suspects.
Earlier police in Turkey expanded their search for Mr Khashoggi’s body, with unnamed officials saying his body may have been disposed of in the nearby Belgrad forest or on farmland.
Turkey alleges he was murdered in the consulate by a Saudi hit squad.
What did Saudi state media report?
A statement from Saudi Arabia’s public prosecutor said a fight broke out between Mr Khashoggi and people who met him in the consulate – ending with his death.
“The investigations are still under way and 18 Saudi nationals have been arrested,” the statement read.
Reports also spoke of the dismissal of the two senior officials.
Saud al-Qahtani is a prominent member of the Saudi Royal Court and adviser to Prince Mohammed bin Salman.
Major-General Ahmed al-Assiri has acted as the top spokesman for the kingdom about the war in Yemen.
Gen Asiri spoke to the BBC in 2017 about the conflict, defending Saudi Arabia’s actions.
What happened to Jamal Khashoggi?
Mr Khashoggi – a prominent journalist who fell out of favour with the Saudi government – had been living in self-imposed exile in the US since last year.
He was last seen entering the Saudi consulate in Turkey’s capital Istanbul on 2 October, to pick up paperwork that would allow him to marry his fiancée Hatice Cengiz.
Turkish officials believe Mr Khashoggi was killed by a team of Saudi agents inside the consulate, and his body then removed.
Saudi Arabia has denied the claims, and initially insisted Mr Khashoggi had freely left the embassy.
Why does Turkey say he was murdered?
Turkish officials say they have audio and video recordings that show Mr Khashoggi being murdered by a team of Saudi agents.
Turkish newspapers with close links to the government have published gruesome details of the alleged audio, including what they describe as the sounds of screams and Mr Khashoggi being interrogated and tortured.
Meanwhile, Turkish media say they have identified a 15-member team of suspected Saudi agents who flew into and out of Istanbul on the day of the disappearance.
Turkish officials say the group brought a bone saw into the country and that one of its members was a doctor who specialised in post-mortems.