The American has paid the price for a wretched run of form which has seen Leeds slide dangerously close to the relegation zone.
The Whites have not won any of their last seven Premier League games and a 1-0 defeat to Nottingham Forest on Sunday left them only outside the relegation zone on goal difference.
Marsch signed a three-and-a-half-year contract when he replaced Marcelo Bielsa as Leeds manager in March last year.
After helping Leeds escape relegation, Marsch spent over £100m on new players to beef up the squad but results have not been forthcoming.
"We would like to thank Jesse and his backroom staff for their efforts and wish them well for the future," Leeds said in a statement.
"The process of appointing a new head coach is under way and we will continue to keep supporters up to date throughout the coming days."
Leeds have only won four Premier League games this season and their next two fixtures are all against Manchester United.
