A statement on the club's official website confirmed chairman Shahid Khan had acted following t he Cottagers' dismal start to the campaign
Fulham, relegated from the Barclays Premier League last season, lie bottom of the Championship with one point from their opening seven games.
The final straw for Khan was Wednesday night's 5-3 defeat at leaders Nottingham Forest, where visiting fans once again called for the German to be sacked.
Fulham's under-21 coach Kit Symons has been placed in caretaker charge for Saturday's visit of Blackburn.
In a statement on Fulham's official website, Khan said: "This is an unfortunate but necessary change
I am doing what I feel is right and needed for Fulham Football Club, for today as well as tomorrow.
"I thank our supporters for standing by us during these most difficult of times on the pitch, and promise better days ahead."
Magath was appointed Fulham's third manager of last season in February, replacing Rene Meulensteen, but was unable to save them from the drop.
The 61-year-old's managerial methods came under fire from former players with ex-skipper Brede Hangeland, who was released in the summer, claiming he had actually "made things worse" after taking over.
Fulham overhauled their squad in the summer, also releasing long-serving players like Steve Sidwell and Damien Duff, but they did spend a reported £11million to bring striker Ross McCormack in from Leeds.
However, a largely youthful team built around captain Scott Parker have looked out of their depth so far this term.
Magath was in charge for 20 matches in total and his side won just four of them, the last victory coming against Norwich in April.
Symons, Steve Clarke and Chris Hughton are among the names being linked with now vacant role.
Source : PA