Lawmakers voted 72 to 42 to censure Jara, who lost the vote of confidence in Congress after the magazine Correo Semanal published a list of Peruvians who had allegedly been investigated by the National Intelligence Directorate (DINI).
According to the magazine, the spy agency accessed information from Peru's national registry, a fact that angered opposition members of Congress.
The scandal is the biggest crisis for the beleaguered administration of President Ollanta Humala since he took office in July 2011.
With a year left of his term and an approval rating of 25 percent, President Ollanta Humala has to select a new prime minister and cabinet, all of whom must be approved by congress.
The move follows Jara's decision to sack the DINI's director as well as its counterintelligence and national intelligence chiefs the day after the allegations emerged.
Jara is the first prime minister forced to step down since 1968.
Last month, the government ordered the intelligence service to temporarily close over allegations of spying on both government officials and opposition figures.
This content was originally published by teleSUR at the following address: http://www.telesurtv.net/english/news/Perus-Congress-Sacks-Prime-Minister-over-Spying-Scandal-20150331-0005.html.