Ranieri took over at Vicarage Road on a two-year deal at the start of October after Watford parted company with Xisco Munoz.
Watford were 14th on the table when Ranieri arrived but a run of just two wins in 13 Premier League games under the Italian has seen the slip to 19th on the standings.
Last weekend’s 3-0 home defeat to relegation rivals Norwich City has proven to be the final straw and Ranieri has paid the price.
A club statement read: “Watford Football Club confirms the departure of Head Coach Claudio Ranieri.
“The Hornets' Board recognises Claudio as a man of great integrity and honour, who will always be respected here at Vicarage Road for his efforts in leading the team with dignity.
“However the Board feels that, with nearly half of the Premier League campaign remaining, a change in the Head Coach position now will give a new appointment sufficient time to work with a talented squad to achieve the immediate goal of retaining Premier League status.
“No further club comment will be made until this new appointment is confirmed in due course.”
Ranieri is the eighth Premier League manager to be sacked this season after Xisco Munoz, Steve Bruce, Ole Gunnar Solskjaer, Dean Smith, Daniel Farke, Nuno Esperito Santo and Rafael Benitez.
