Stretching back to last season, Wolves have won just one of their last 15 Premier League games, losing nine times.
Saturday's 2-0 defeat to West Ham United left Wolves in the bottom three and it was one loss too many for the club's hierarchy, who have decided to show the former Benfica manager the door.
Lage was appointed to replace Nuno Esperito Santo last summer and guided Wolves to a 10th place finish in his only full season in charge.
An official statement posted on the club's social media channels reads: ''Wolves have parted company with head coach Bruno Lage. We would like to thank Bruno and his coaching team for their efforts during their time at the club and wish them the very best for the future.''
"Bruno is an excellent coach, a hardworking and dedicated manager, and a warm, wise and honest man," Wolves chairman Jeff Shi said in a statement.
"He and his staff have been a pleasure to work with throughout their time at Wolves, so it is with much sadness that we have had to make what has been a difficult decision.
"I honestly have no doubts about Bruno's ability, and I'm sure he will succeed elsewhere, however the team's form and performances over the last few months mean that we have no choice but to act."
Wolves' next game is away to Chelsea next weekend.
