The 48-year-old's future had been the subject of intense scrutiny over the last few days.
Mancini learned on Monday night he had been relieved of his duties after failing to achieve the club's "stated targets" for the season.
The news comes exactly a year to the day after City won the Premier League in dramatic circumstances on the final day of last season.
But it is Mancini's failure to build on that achievement that has seen his three-and-a-half year tenure brought to an end.
A club statement read: "It is with regret that Manchester City Football Club announces that Roberto Mancini has been relieved of his duties as Manchester City manager.
"This has been a difficult decision for the owner, chairman and board to make and it is the outcome of a planned end-of-season review process that has been brought forward in light of recent speculation and out of respect for Roberto and his extensive contributions to the football club.
"Despite everyone's best efforts, the club has failed to achieve any of its stated targets this year, with the exception of qualification for next season's UEFA Champions League.
"This, combined with an identified need to develop a holistic approach to all aspects of football at the club, has meant that the decision has been taken to find a new manager for the 2013-14 season and beyond.''
City's statement added that assistant manager Brian Kidd would be placed in interim charge for the remaining two matches of the season and the forthcoming tour of the United States.
Source: Manchester City MAD
Source: FOOTYMAD
