NSW Finance Minister Greg Pearce stood down

The NSW finance minister, Greg Pearce, has been sacked for failing to declare a conflict of interest.

The state's Premier Barry O'Farrell said Pearce has breached the ministerial code of conduct.

Mr O'Farrell says he told Mr Pearce of his decision over the phone at 1.45pm (AEST) on Thursday.

It follows months of allegations of wrongdoing and questionable conduct by Mr Pearce.

On Thursday, after previously standing by Mr Pearce, Mr O'Farrell said the finance minister had failed to declare a conflict of interest in appointing lawyer Richard Fisher to the board of Sydney Water.

Mr Pearce's wife reported to Mr Fisher in her area of work, Mr O'Farrell said.

"The ministerial code of conduct is very clear," Mr O'Farrell told reporters.

"I've repeatedly said I expect the highest standards from my government.

"Where codes are broken there will be consequences."

Mr Pearce will be replaced by Disabilities Services Minister Andrew Constance.

John Ajaka will join cabinet as Mr Constance's replacement.