Gillingham sack forme Leicester and Hull boss Peter Taylor
A statement on the club website said Taylor, who turns 62 on Saturday, has been "relieved of his duties with immediate effect".
Former Gills boss Andy Hessenthaler, 49, has been placed in caretaker charge by chairman Paul Scally for Saturday's League One game at Port Vale.
The Gills are currently one place and two points above the relegation zone.
Taylor was appointed interim Gillingham manager in October 2013, following the dismissal of Martin Allen, and was handed the job until the end of the 2013-14 season a month later.
The former Leicester, Hull and Crystal Palace boss agreed a two-year deal with the Kent club in the summer.
Taylor targeted a mid-table finish in pre-season but the Gills have found themselves in the lower reaches of the table since September.
Having previously led Gillingham to promotion to the second tier after spending the 1999-2000 season in charge of the club, Taylor was given the backing of chairman Scally in October.
Hessenthaler, who was player-manager of the Gills between June 2000 and November 2004 and had a second spell in charge between May 2010 and May 2012, was assistant manager at Priestfield Stadium.