Somali Prime Minister Abdi Farah Shirdon lost a vote of confidence in the Somali Parliament after 15 months in office. He lost by a vote of 184-65.
Kay was quoted by the BBC as saying he was pleased a political row between Shirdon and Somali President Hassan Sheik Mohamud was settled according to the terms of the Somali constitution.
"Somalia's institutions are coming of age," he said.
Shirdon told the BBC he'd accept the decision in a show of support for Somalia's "weak" institutions.
Mohamud has 30 days to appoint a new prime minister.
Kay expressed frustration last weekend with political violence in the northern Somali region of Puntland. The United Nations said at least 10 people were killed in recent clashes ahead of a regional vote set for January.
"Political differences ... should be solved by dialogue," he said in a statement Saturday.
Somalia recently formed its first functioning central government since the 1990s. It has struggled to exert its authority beyond Mogadishu amid separatist ambitions and terrorism threats.