A number of other names remain in the frame for the job, including ex-Wolves manager Mick McCarthy and former Forest player Roy Keane.
I'm sure you can remember Keane walked out of the Irish squad ahead of a major event because he thought (then Ireland coach) McCarthy's preparation was "a joke".
Keane saying he would rather walk his dogs than play for McCarthy.
Cotterill took the Forest job last October and guided the club to Championship survival.
NFFC club statement: "Nottingham Forest can confirm that manager Steve Cotterill has departed the club with immediate effect.
"Mr Cotterill met with the club's new owners, the Al-Hasawi family, yesterday and after long deliberations they have decided to make a new appointment in a bid to deliver their long-term vision.
"The club would like to acknowledge their gratitude to Mr Cotterill for guiding it through an extremely difficult and traumatic period and for retaining the side's Championship status last season.
"The club will be making no further comment at this time."