Vigilantes entered city hall in Apatzingan, located in the western Mexican state of Michoacan, and demanded that Mayor Uriel Chavez Mendoza resign, media reports said.
The hundreds of vigilantes who crowded into city hall on Monday accused the mayor of having links to the Caballeros Templarios, a drug cartel with a large presence in Michoacan.
Apatzingan is the biggest city in the Tierra Caliente region, which takes its name from the high temperatures in the area and straddles Michoacan, Guerrero and Mexico states.
Community self-defense groups sprang up across the region last year to fight the cartel in light of authorities' failure to combat crime.
The vigilantes entered city hall around 11:00 a.m. Monday and called on Chavez Mendoza, a member of the governing Institutional Revolutionary Party, or PRI, to step down, accusing him of playing a role in the disappearances of about 300 people in the Tierra Caliente.
The Federal Police has been responsible for providing security in Apatzingan, a city of some 100,000 people, since mid-January, while the army patrols the surrounding area.
Vigilantes peacefully entered Apatzingan, considered the main stronghold of the Caballeros Templarios, on Feb. 8, but they later pulled out and set up checkpoints outside the city.
Unarmed vigilantes are manning the checkpoints to prevent cartel members and supporters from entering, the groups said.
Federal Police officers entered city hall, escorted the mayor to an armored car and drove him home.
City officials evacuated the building to prevent violence, Apatzingan government spokesmen said.
Los Caballeros Templarios, a gang founded in December 2010 by former members of the La Familia Michoacana cartel, deals in both synthetic and natural drugs.
The gang commits murders, stages kidnappings and runs extortion rackets that target business owners and transport companies.
The cartel uses Michoacan's 270 kilometers (168 miles) of coastline to smuggle chemical drug precursors for the production of synthetic drugs into Mexico.
Civilians began arming themselves last year to fight the Caballeros Templarios, which operates across Michoacan.
The federal government deployed soldiers and police in Michoacan on Jan. 13 in an effort to end the wave of violence in the state.
Dionisio Loya Plancarte, one of the cartel's top leaders, was arrested by federal forces in late January. EFE