Rights groups and European officials criticized the confiscation of Zaman and its sister publication, the English-language Today's Zaman, which occurred on the eve of a summit between Turkey and the European Union and as concerns mount that the Turkish government is stifling critical media.
Administrators were appointed to run Zaman at the request of an Istanbul prosecutor, state-run Anadolu Agency reported. Officials were not immediately available to confirm the reports.
Erdogan accuses Gulen of conspiring to overthrow the government by building a network of supporters in the judiciary, police and media. Gulen denies the charges. The two men were allies until police and prosecutors seen as sympathetic to Gulen opened a corruption probe into Erdogan's inner circle in 2013.
"It has been a habit for the last three, four years, that anyone who is speaking against government policies is facing either court cases or prison, or such control by the government," said Abdulhamit Bilici, editor-in-chief of Zaman.
"This is a dark period for our country, our democracy."
Zaman is Turkey's biggest selling newspaper, with a circulation of 650,000 as of the end of February, according to media-sector monitor MedyaTava website.
Police in riot gear pushed back Zaman supporters who stood in the rain outside its Istanbul office where they waved Turkish flags and carried placards reading "Hands off my newspaper" before they were overcome by clouds of tear gas, live footage on Zaman's website showed.
Officers then forcibly broke down a gate and rushed into the building. The footage showed them scuffling with Zaman staff inside the offices.
"Zaman Media Group being silenced in Turkey. Crackdown on press freedom continues sadly," Kati Piri, the European Parliament's rapporteur on Turkey, said in a tweet.
The EU is accused of turning a blind eye to Turkey's human rights breaches, including the deaths of hundreds of civilians during security operations against Kurdish militants, because it needs Turkey's help curbing the flow of migrants.
The crackdown on Zaman comes at an already worrying time for press freedom in Turkey.
Two prominent journalists from the pro-opposition Cumhuriyet newspaper are facing potential life sentences on charges of endangering state security for publishing material that purports to show intelligence officials trucking arms to Syria.
Authorities have previously seized and shut down opposition media outlets associated with the Gulen movement. The state deposit insurance fund said this week that an Islamic bank founded by Gulen followers might be liquidated within months.
The Zaman takeover came hours after police detained businessmen over allegations of financing what prosecutors described as a "Gulenist terror group", Anadolu said.
Memduh Boydak, chief executive of furniture-to-cables conglomerate Boydak Holding, as well as the group's chairman Haci Boydak and two board members, were taken into custody.
Nobody from the company, based in the central Turkish city of Kayseri, was available to comment.
The Committee to Protect Journalists, the New York-based advocacy group, expressed "alarm" over the court ruling against Zaman, and executive director Joel Simon said in a statement it "paves the way to effectively strangle the remnants of critical journalism in Turkey."
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