The former Italian international was in his second spell as Guangzhou manager, having initially taken charge of the side in November 2014 to June 2015 before returning in November 2017.
Cannavaro led Guangzhou to the Chinese league title in 2019 and finished runners up on two occasions. He also won the Chinese FA Cup in 2018.
Guangzhou are facing financial difficulties, with owners Evergrande facing a potential demise.
"After friendly negotiation, Guangzhou Football Club decided to terminate the contract with Mr. Fabio Cannavaro," a club statement read on Tuesday.
"Since November 2017, Mr. Cannavaro has served as the head coach of the Guangzhou team, leading the team to win the 2018 Chinese Football Association Super Cup champion, the 2019 Chinese Football Association Super League champion and many other honours.
"Here, I would like to sincerely thank Mr. Fabio Cannavaro for his great efforts and positive contributions to the Guangzhou team, and wish him all the best in the future."
Cannavaro,48, retired from football in 2011 at the age of 37 and played for the likes of Parma, Napoli, Inter Milan, Juventus, and Real Madrid during his career.
Cannavaro was captain of the Italy national team when they won the FIFA World Cup in 2006.
