The 45-year-old's departure was confirmed by the Black Cats on Sunday, a little more than 24 hours after a 3-0 defeat at West Brom left them rooted to the foot of the Barclays Premier League table.
A statement said: "Sunderland AFC confirms that it has parted company with head coach Paolo Di Canio this evening."
Former Sunderland captain Kevin Ball, currently on the club's coaching staff, steps in to lead the team on a short-term basis.
Sunderland's statement added: "Kevin Ball will take charge of the squad ahead of Tuesday night's Capital One Cup game against Peterborough United and an announcement will be made in due course regarding a permanent successor. The club would like to place on record its thanks to Paolo and his staff and wishes them well for the future."
He was handed the reins with just seven games of the 2012-13 season remaining and relegation a genuine possibility.
A 2-1 defeat at Chelsea in his first game was followed by a famous 3-0 derby victory at Newcastle in his second, and his knee-sliding celebrations at St James' Park earned him a place in Sunderland folklore with his tenure still in its infancy.
A 1-0 home win over Everton next time out persuaded many more of the doubters that he was the real deal, but it proved to be a false dawn.
Sunderland came down to earth with a painful bump when they headed for struggling Aston Villa on April 29 and returned on the wrong end of a 6-1 hammering, and they eventually secured their top-flight status, if only just, by finishing in 17th place.
14 West Brom 5 15 West Ham 5 16 Cardiff 5 17 Norwich 4 18 Fulham 4 19 C Palace 3 20 Sunderland 1
He recruited 14 new players during the summer transfer window, several for the first-team squad but others for the development ranks.
But crucially, having already lost loan signing Danny Rose following his return to Tottenham, they sold Simon Mignolet to Liverpool and, on deadline day, Stephane Sessegnon to West Brom. It meant they had lost arguably three of their most effective players.
Speaking after a 3-1 home defeat by Arsenal last weekend, he said: "After 20 games, if you are still at the bottom and you are 10 points, 12 points from the fourth place from the bottom, you can start to think, 'Eighteen games to go, okay, plenty of points, but it's difficult'.
"But now we are all there and we are starting to play good football."
Even after Saturday's reverse at the Hawthorns, where he spoke to travelling fans from the pitch following the final whistle, Di Canio was remaining upbeat.
He said: "One game, one win, will clean all the players' brains from the problems they have now."