Petkovic announced in December that he would leave the capital club upon the expiry of his contract to take charge of Switzerland's national team after they compete at the 2014 FIFA World Cup.
That drew the ire of Lazio president Claudio Lotito, with reports suggesting he would launch legal action against what he believed to be a breach of contract.
Despite Petkovic claiming he was still in charge, Reja was pictured leading the club's training sessions following the mid-season break, with Lazio set to resume their campaign on Monday with a home clash against Inter.
However, the 50-year-old has now been removed from the Lazio hotseat, and replaced by Reja, whose near-18-month stay at the Stadio Olimpico between February 2010 and May 2012 was often characterised by threats to quit.
A Lazio statement said of Petkovic's departure: "Incidents resulted in a breach of trust, which is an essential element in a working relationship."
The former Sion boss' staff have also followed him out the door, and replaced by Reja's assistants Alberto Bollini and Adriano Bianchini.
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