The news arrived a day after Spurs were thrashed 5-0 by Liverpool at White Hart Lane, which left the north London club five points below the Champions League places in seventh in the Premier League table.
"The club can announce that agreement has been reached with head coach, Andre Villas-Boas, for the termination of his services," read a statement on the Tottenham website.
"The decision was by mutual consent and in the interests of all parties. We wish Andre well for the future. We shall make a further announcement in due course."
Villas-Boas, 36, had also seen his side demolished 6-0 at Manchester City last month, despite Spurs having invested around £105 million ($171 million, 124 million euros) on new players during the close season.
That expenditure was, however, offset by the sale of Gareth Bale to Real Madrid, but Spurs have scored just 15 goals in their 16 league games this season since the Welshman left the club.
Villas-Boas's dismissal represents his second consecutive failure at a London side as he was sacked by Chelsea in March 2012 after only nine months at the Stamford Bridge helm.
He joined Spurs the following July but despite leading the club to their highest points tally of the Premier League era last season (72), they missed out on a Champions League place to arch-rivals Arsenal.
Speaking after the drubbing by Liverpool, Villas-Boas had vowed that he would not walk away from the club.
"The call to make that decision is not mine because obviously I won't resign and I'm not a quitter," he said.
"The only thing I can do is work hard with the players to get them back on track. This is a top-four squad but in our Premier League form we are not there."
While Spurs have misfired in the league, they qualified for the last 32 in the Europa League after winning all six of their group games.
They are also due to play West Ham United in the quarter-finals of the League Cup on Wednesday.
Villas-Boas becomes the fifth Premier League manager to lose his job this season.
Paolo Di Canio was the first to go at Sunderland, followed by Ian Holloway at Crystal Palace and Martin Jol at Fulham, while West Bromwich Albion parted company with Steve Clarke on Saturday.
Russia manager Fabio Capello, the former England head coach, was swiftly installed as the British bookmakers' favourite to succeed Villas-Boas, who first came to prominence at Porto.
Swansea City manager Michael Laudrup and experienced Dutch coach Guus Hiddink are also reported to be in contention.
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