Anthony Hudson. Photo: Getty Images
Hudson joined the MLS franchise after New Zealand's loss to Peru in the inter-continental playoff for the 2018 World Cup.
Colorado have won just eight of Hudson's 43 matches in charge and are without a win in nine games this season.
"We appreciate Anthony's commitment to the Rapids organization during his time with the club," said Rapids Executive Vice President & General Manager, Pádraig Smith said in a statement.
"This is a pivotal period in the development of our team and it's in the club's best interest to make a change now. We still have a lot of season left and we look forward to getting back on track."
Assistant coach Conor Casey has been named interim head coach.
