Lincoln City put manager on gardening leave
Simpson was appointed boss of the Conference side in February 2013 and signed a three-year deal in April 2013.
A club statement said the decision was taken after looking at "progress made and performance levels" this season.
The 53-year-old will be on gardening leave until his "future is resolved".
The Imps are 13th in the Conference table following Saturday's 3-3 draw with Forest Green Rovers, a game they had led 3-0.
Lincoln, who have won just two of their last 10 league matches, are eight points adrift of the play-off places and seven points above the relegation zone after 18 games.
Sheffield-born Simpson has a strong link to Lincolnshire, having played almost 200 games for Boston during two spells with the club and also been manager of Gainsborough Trinity for two seasons.
He was named Imps manager last year with the club two places and two points above the relegation zone following David Holdsworth's departure.