The former England boss was only in charge at the Championship club for a year but an inconsistent start to the season and an unsatisfactory league position of 13th has prompted both parties to make the decision.
A statement on the club's official website read, "Leicester City Football Club has confirmed today that, by mutual agreement, Sven Goran Eriksson has ceased to be the First Team Manager, with immediate effect."
It is thought that Saturday's 3-0 defeat to Millwall was the final straw for the Foxes board who state that the search for a successor to Sven will begin in the coming days.
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