A fifth straight defeat to Melbourne Heart on Saturday was the last straw for owner Tony Sage who has appointed Australia Under-17 coach and former Glory striker Alistair Edwards as interim coach for the remainder of the season.
Football Federation Australia has temporarily released Edwards from his national team duties.
Sage told a press conference: "It was mutually agreed that (Ferguson) leave the club, and we have appointed Alistair Edwards as the new manager.
"(Ferguson) agreed that it was unacceptable being bottom of the league, given the squad he's got, and we again mutually agreed it's best for him to go.
"It's an interim situation. What we're going to do under (deputy chairman) Lui Giuliani is advertise worldwide for a coach for next season."
Sage disagreed with Ferguson's assessment after Saturday's loss to Melbourne Heart that he lacked squad depth due to budget cuts.
"I don't agree with that. He had the full support of finances," said Sage.
"He assembled his squad by June 30. That squad cost 3.2 million US Dollars. Our salary cap is 2.5 million US Dollars, so I can't understand a comment like that.
"I take that as a slight on the club."