Tuesday's decision to expel Bo Xilai from the Central Committee and to name his wife, Gu Kailai, as a murder suspect is likely to rattle leadership succession plans.
"Comrade Bo Xilai is suspected of being involved in serious disciplinary violations," said the news agency, citing the decision by the central party leadership.
"Police set up a team to re-investigate the case of the British national Neil Heywood who was found dead in Chongqing," Xinhua said in a separate report.
Chongqing, a sprawling southwestern municipality, is where Bo was party chief until he was dismissed in March as a scandal surrounding him unfolded.
The move to expel Bo from the Central Committee and its Politburo effectively ends the career of China's brashest and most controversial politician.
Dramatic turn
Xinhua said that "existing evidence indicates Heywood died of homicide, of which Gu Kailai and Zhang Xiaojun, an assistant in Bo's household, are highly suspected".
The news agency referred to a dispute over unspecified "economic interests" between Gu and Heywood.
The Central Committee is a council of about 200 full members who meet about once a year and the Politburo is a more powerful body of about two dozen Central Committee members.
The announcements are the latest dramatic turns in the scandal over Bo and his family that emerged after his vice mayor, Wang Lijun, fled into a US consulate for 24 hours in February.
The decision does not mean Bo has been expelled from the Communist Party. But that risk, and the possibility of criminal charges, remain if the investigation gathers momentum.
Government offices did not immediately comment on the reported decision about Bo.
Covert discussions
Bo had earlier exuded ambition to enter the next Politburo Standing Committee. A party congress later this year will unveil the new leadership line-up.
The discipline commission is an elite body that enforces party rules and investigates officials accused of corruption and other abuses.
China's censors worked hard to block sensitive words on Chinese microblogging sites, including "Chongqing"; but many users skirted the restrictions and obliquely discussed Bo's fate with a mixture of innuendo and word play.
