Trudeau announced that former justice minister Jody Wilson-Raybould and former treasury board minister Jane Philpott would no longer be allowed to sit as legislators for the ruling Liberal Party.
The Liberals have been in turmoil since Ms Wilson-Raybould said in February that officials had inappropriately pressured her to ensure a major construction company escaped a corruption trial when she was justice minister last year.
“The trust that previously existed between these two individuals and our team has been broken,” Mr Trudeau told an emergency meeting of caucus.
Ms Wilson-Raybould was demoted in January and resigned the next month. Ms Philpott quit shortly afterwards, saying she had lost confidence in how Mr Trudeau was handling the matter.
Increasingly angry legislators had demanded both women be removed from caucus on the grounds they were undermining party unity. Polls show the crisis has cut public support for the Liberals and could lead to their defeat in an October election.
Mr Trudeau has denied any wrongdoing. The scandal is starting to hit his fortunes in the populous province of Quebec, where the ruling Liberals say they need to pick up seats in an October election to remain in power.
Liberals, who had once predicted the party could win an extra 20 seats in Quebec, now say that 15 is the most likely maximum gain. In a tight election, that could make all the difference.