Wolfsburg have won just four games this season and have slumped to 13th in the Bundesliga. That is deemed unacceptable to the German side's hierarchy.
McClaren's situation was not helped by Wolfsburg's embarrassing 3-1 home defeat by Second Division Energie Cottbus in the German Cup on Wednesday.
The pain game: Steve McClaren feels the heat during Wolfsburg's defeat to Energie Cottbus
It stretched their run without a win to eight games and McClaren said: 'It was just not good enough today; it was not good enough throughout the whole first half of the season.
'I am disappointed and frustrated. We have hit bottom. The club needs changes now. Nobody knows what will happen in the next days.'
General manager Dieter Hoeness added: 'I need to allow this to sink in. It is not easy to return to your day-to-day business after such a result. I will not sleep well tonight. This result has turned the holidays upside down. But I will not act without considerable thought.'
German daily newspaper Bild had already turned on McClaren, dubbing him 'Steve McSiege-Weg', meaning Steve McWinsGone.
Frustrated: Wolfsburg's star striker Edin Dzeko
Francisco Garcia Sanz, Wolfsburg's chairman and a member of the management board of Volkswagen, who own the club, did little to dampen speculation about McClaren's future. He did not mention McClaren by name but absolved Hoeness from any blame for the team's plight, saying: 'We did not envisage being 13th in the table and are definitely not happy. But we still have every confidence in Dieter.'
Edin Dzeko scored again but is looking increasingly frustrated and could join Manchester City in January.
McClaren is bound to be linked to Premier League vacancies but is understood to prefer remaining on the continent. He went to Wolfsburg after his career was resurrected by leading FC Twente to the Dutch championship last season following his dismissal as England coach.
Wolfsburg won the Bundesliga in 2009 but finished eighth last season. McClaren was seen as the man to lead them back to the top and spent £12m on Werder Bremen's Diego, £8m on Dinamo Zagreb's Mario Mandzukic and £10m on Palermo defender Simon Kjaer.
But McClaren has not brought the results expected of him and Wolfsburg have slipped into the wrong half of the table.
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