Sevilla have endured a wretched start to the season, winning just once in ten games across all competitions.
They sit one place above the relegation zone in La Liga and the defeat to Dortmund sees them face an uphill task of qualifying from their Champions League group.
Lopetegui was appointed Sevilla manager in the summer of 2019 and won the Europa League in his first season in charge, beating Antonio Conte's Inter Milan in the final.
Sevilla achieved top four finishes in each of Lopetegui's three full seasons but this campaign has not gone according to plan.
The 56-year-old appeared downhearted about his future after the defeat to Dortmund, telling reporters: "Right now I'm still coach of Sevilla but... I've already said goodbye to the team.
"I don't get a negative feeling right now. The first thing I feel is gratitude to a club like Sevilla, the fans, the people of the city and my players, who have given me three wonderful seasons.
"I arrived with doubts and it was possible to turn it around with many successful seasons."
The Andalusian club duly confirmed his dismissal shortly after with a statement which read: "Sevilla have dismissed Julen Lopetegui as coach of the first team after the clash [with] Borussia Dortmund on Wednesday."
"Lopetegui closes a successful stage with three magnificent campaigns in which the objectives were more than achieved, and a fourth season in which the results have not been on track, with Sevilla [taking] five points out of a possible 21 in LaLiga."
Lopetegui has already been linked with the vacant manager's job at Wolverhampton Wanderers while former Argentina coach Jorge Sampaoli has been touted for a possible return to the Ramon Sanchez Pizjuan.
