BBC reports that the Black Cats sit one point above the Premier League relegation zone with seven games left after a 1-0 defeat by Manchester United on Saturday.
Sunderland is without a win in eight league matches, during which the club had picked up only three points.
The club said a decision on O’Neill’s successor would “be made in the coming days.”
A statement reads: “Sunderland AFC has announced that it has parted company with manager Martin O’Neill.
“The club would like to place on record its thanks to Martin and wishes him well for the future.”
There was no hint of an exit for the 61-year-old in chairman Ellis Short’s programme notes before the game against the league leaders, with the American instead calling for a united front.
“Of course, there is nobody that is happy with our current position and the way our season is going,” he wrote. “The reality is that we have a fight on our hands.