Ancelotti led Real to their 10th European Cup success last season but has been shown the door after they finished runners-up to Barcelona in La Liga and lost to Juventus in the semi-finals of the Champions League.
Real president Florentino Perez held a meeting with Ancelotti on Monday afternoon where he told the former AC Milan, Chelsea and Paris St Germain boss, who had one year left on his contract, that his services were no longer required.
“I would like to inform you that the board has taken the decision to relieve Carlo Ancelotti of his post as Real Madrid coach,” Perez said at a press conference.
“It was a very difficult decision to make; the demands at this club are the utmost because Madrid always wants to win silverware.
“The affection that the players and the fans have for Carlo is the same as the affection I myself have for him.
“What did Ancelotti do wrong? I don’t know. The demands here at Real Madrid are very high.”