The 48-year-old replaced Pierpaolo Bisoli at the Stadio Renato Dall'Ara in October 2011 and guided Bologna to ninth place at the end of his first season at the helm.
A 13th-place finish followed in 2012-13 but results have caused serious concern in the current campaign, with the Rossoblu winning only three league games and sitting in 17th place, just one point outside the relegation zone.
A statement published on Bologna's official website read: "Bologna announce that, in light of recent disappointing results, the club are compelled to dismiss our first-team coach Stefano Pioli with deep regret.
"We sincerely thank Pioli and his staff for the work they did with great professionalism, passion and with a rare attachment to the fate of our club over recent years.
"In the coming hours the new coach will be announced."
Reports in Italy suggest former Genoa boss Davide Ballardini is the man who will take the Bologna job and lead preparations for Saturday's league visit of Lazio.
Pioli, who also numbers Palermo, Chievo and Parma among his former clubs, oversaw five defeats from eight at the start of the season before claiming back-to-back victories over Livorno and Cagliari to ease the pressure.
Results dropped off significantly, though, with a 1-0 home victory over Genoa on December 22 coming amid three defeats without a goal or a point.
His last game in charge of the Rossoblu was Monday's 2-0 defeat to bottom club Catania.