ABC directors met on Thursday and decided Milne should stand aside while a government investigation took place, which prompted the ABC chair to resign.
Mr Milne indicated on Wednesday he had no intention of quitting over the scandal, but has stepped down as chairman of the national broadcaster after a second board meeting in two days.
He claimed, according to written accounts of the conversation provided to ABC directors, that the political journalist Andrew Probyn was so out of favour that the broadcaster's state funding was at risk.
Milne had directed Guthrie to fire ABC chief economics correspondent Emma Alberici.
The nearly century-old Australian Broadcasting Corporation is incredibly popular Down Under, with polls showing it is not just the most trusted news organization in the country, but also seen as a national treasure.
Malcolm Turnbull sent a list of concerns to ABC news director Gaven Morris about Alberici's coverage of the government in May.
Mr Milne said there was no political interference from the government in his decisions.
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The sacking led to an inquiry into Milne's actions and enormous public pressure, including from the broadcaster's employees, who are understood to have been considering industrial action had the chairman remained in his job.
Turnbull, who has lived in NY since he was ousted as prime minister on August 24, said on Thursday that while he had complained about the two reporters' journalism, he had never asked for them to be fired.
The rhetoric at a smaller gathering in Brisbane was stronger, where a resolution was passed demanding Mr Milne resign.
Communications minister Mitch Fifield has asked his department to launch an official investigation into the intrusion of the government in the editorial operations of the ABC. "We need to save the ABC not Emma", he added.
Asked Thursday in an interview with ABC if his resignation was an acknowledgement of a failure to protect the network's independence, Milne responded: "Absolutely 100 percent not". She was criticized for her management style and told that her relationships with government "could have been better".
Milne told the ABC the crisis had been a "firestorm" and said he "wanted to provide a release valve". On another story about innovation, the ABC issued a minor clarification but otherwise rejected the government's complaints.
Australian Prime Minister Scott Morrison denied his predecessor Malcolm Turnbull sought to influence the ABC.
The ABC is funded by the government but is an independent body.