The decision was announced on the club’s official website on Friday.
Caparros made Granada his 18th club when he swapped Levante for them last summer, but he has presided over a horror run of results.
Granada have won just two games in the league all season and on Wednesday were beaten 4-0 at Sevilla in the Copa del Rey. They head to reigning champions Atletico Madrid on Sunday.
Assistant Joseba Aguado will coach the side for that clash while a permanent replacement is sought.