Giampaolo replaced Gennaro Gattuso as Milan boss at the end of last season, looking to improve upon a fifth placed finish that saw them miss out on the UEFA Champions League on the last day of the season.
The former Sampdoria boss has however failed to galvanise the side, with just three wins and four defeats in their first seven games of the season.
Milan came from behind to beat Genoa on Sunday, but that win failed to convince the AC Milan hierarchy, who have opted to relieve Giampaolo of his duties.
In a brief statement published on Tuesday, the club said: "AC Milan announces it has relieved Mr. Marco Giampaolo from his position as coach of the first team.
"The club is grateful to Marco for the work carried out and wishes him all the best to come in his professional career."
Former Inter Milan and Fiorentina manager Stefano Pioli is the bookmakers’ favourite to take over from Giampaolo at the San Siro.
Seven-time European champions AC Milan, have lost their way in the upper echelons of Italian and continental football in recent seasons.
They have not won the Serie A since Massimiliano Allegri led them to the title in 2011, while they have not played in the UEFA Champions League since the 2013/2014 season.
Despite finishing fifth last season, AC Milan are not competing in this season’s Europa League after accepting a one-year ban from UEFA for breaching financial fair play rules.
