Manchester United regained the title last month with four games to spare and City were then beaten 1-0 by Wigan Athletic in last Saturday's FA Cup final.
"It is with regret that Manchester City Football Club announces that Roberto Mancini has been relieved of his duties as Manchester City Manager," the club said in a statement.
"This has been a difficult decision for the owner, Chairman and Board to make and it is the outcome of a planned end of season review process that has been brought forward in light of recent speculation and out of respect for Roberto and his extensive contributions to the Football Club."
Media speculation has been rife that Malaga coach Manuel Pellegrini is being lined up as a replacement but earlier on Monday the Chilean denied he had spoken with City and said no agreement had been reached.
Assistant manager Brian Kidd will be in charge for City's remaining two games of the season and the post-season tour to the United States.
