The Dutchman only took charge at Goodison Park in summer 2016 and oversaw £140m of investment in new players during the summer.
The decision follows Sunday’s 5-2 thrashing at home to Arsenal, which pushed Everton into the relegation zone.
“Everton Football Club can confirm that Ronald Koeman has left the club,” the Toffees said on Monday.
“Chairman Bill Kenwright, the board of directors and major shareholder Farhad Moshiri would all like to express their gratitude to Ronald for the service he has given to the club over the past 16 months and for guiding the club to seventh place in last season’s Premier League campaign.”
Everton have lost seven of their last 11 matches in all competitions – four of them at home.
The Merseysiders have struggled following the £75m summer sale of striker Romelu Lukaku to Manchester United, despite spending almost twice as much on new players.
Former Toffees manager David Moyes, current coach David Unsworth and Wales boss Chris Coleman are among the early bookmakers’ favourites to replace Koeman.