Executive director Mwalimu Mati denied the allegations, which arose after an audit of the books of the Kenya branch of Transparency International.

Observers say the dismissal highlights the nature of problems facing Kenya.

Three senior Kenyan government ministers have resigned over corruption claims in the past few months.

This week another corruption scandal involving a bank and millions of dollars of missing taxes has dominated the headlines.

President Mwai Kibaki promised that his priority was to root out corruption when he came to power three more than three years ago.

Irony

The BBC's Adam Mynott in Nairobi says that in a country riddled by corruption, it is hard to deny the irony of the claim that the local head of one of the world's most renowned anti-corruption agencies should be accused of exactly the practices he is supposed to be on the lookout for.

The board of directors of Transparency International Kenya said it had sacked Mr Mati because of "major anomalies and irregularities in contracts awarded to a company run by persons with links to the executive director" and the misuse of Transparency International's name for financial gain.

Mr Mati denied the allegations and said the board of directors was undermining its own authority.

"The board has lost the moral authority to comment on corruption in Kenya because they've shown that they have no respect for due process and they totally do not appreciate, or are not able to comprehend, the whole doctrine of conflict of interests," he told the BBC.