Burnley have struggled this season and sit in 18th place in the standings, four points from the safety zone. But the decision was unexpected, given Dyche's track record of maintaining the Lancashire club's status in the top division on a relatively modest budget.
He was the longest-serving English top-flight manager having been in charge for nine-and-a-half years.
"We would like to place on record our sincere thanks to Sean and his staff for their achievements at the club over the last decade," chairman Alan Pace said in a statement.
"During his time at Turf Moor, Sean has been a credit both on and off the pitch, respected by players, staff, supporters, and the wider football community.
"However, results this season have been disappointing and, while this was an incredibly difficult decision, with eight crucial games of the campaign remaining, we feel a change is needed to give the squad the best possible chance of retaining its Premier League status."
U23s coach Mike Jackson, assisted by academy director Paul Jenkins, U23s goalkeeping coach Connor King and club captain Ben Mee have been asked to take charge of the team for Sunday's game with West Ham United.