Ten Hag's final game was Sunday's 2-1 defeat at West Ham that left the club 14th in the Premier League with just three wins from their opening nine matches.
United are also 21st of 36 teams in the Europa League table, having drawn their three opening fixtures.
Ruud van Nistelrooy, who joined the club as Ten Hag's assistant last summer, has been named as interim manager.
The club said Van Nistelrooy would be in charge "while a permanent head coach is recruited".
Ten Hag was informed of the decision by chief executive Omar Berrada and sporting director Dan Ashworth during a face-to-face meeting at the club's Carrington training ground on Monday morning.
Club sources have stressed this was a difficult decision but a unanimous one.
"Thanks for everything, boss," United captain Bruno Fernandes wrote on Instagram.
"I appreciate the trust and the moments we share together, I wish you all the best in the future."
The club triggered a one-year extension in Ten Hag's contract following May's FA Cup final victory over Manchester City but just over three months later he has been dismissed.
United have their second-lowest Premier League points tally after nine games, with 11 points (they had 10 at this stage in the 2019-20 campaign).
Former Ajax boss Ten Hag, 54, took charge in the summer of 2022 and led the club to third place in the Premier League in his first season.
He also guided United to their first piece of silverware in six seasons with a 2-0 win against Newcastle United in the 2023 Carabao Cup final and finished runners-up in the FA Cup final, losing 2-1 to Manchester City.
His second season in charge started poorly, with United finishing bottom of their Champions League group in the autumn but they picked up a trophy, beating Manchester City in the FA Cup final.
British billionaire Sir Jim Ratcliffe, whose £1.25bn investment for 27.7% of the club was ratified in February of this year, told BBC Sport the club's problems extended far beyond the role of the manager.
"In the past 11 years, Manchester United have had a lot of coaches and nobody has been successful in that environment," said Ratcliffe. "That says to me there is something wrong with the environment."
But a poor start to the campaign, which has seen United win just one of their past eight matches in all competitions, has forced the board to act.
After Ratcliffe's investment was confirmed, Ineos took over football operations at Old Trafford and quickly began a restructure with Dan Ashworth appointed sporting director, Omar Berrada as the new chief executive and Jason Wilcox as technical director.
The manner of United’s unexpected FA Cup win last season meant Ten Hag was given the opportunity to work within a new sporting structure but neither the results nor the performances have been good enough across last season and into this one.
The club's hierarchy wanted to have continuity at a time of significant change, but have not seen the momentum and progress they wanted and sources stress there are no excuses for the current situation.
Fernandes, who was appointed club captain by Ten Hag in 2023, urged supporters to remember the good times.
"Even knowing the last period hasn’t been great from all of us I hope you fans can keep with you the good things the manager has done for our club," Fernandes added on social media.
Former Manchester United captain Gary Neville said Ten Hag's sacking felt inevitable.
"It was coming," Neville said on Sky Sports.
"Tottenham [3-0 home defeat] looked like the kind of game I have seen before. It was a bad day for Manchester United and a bad one for Erik ten Hag. It's got worse and missing chances [on Sunday] was unacceptable.
"The big shock for me is how bad they have been with the new signings. That they are in 14th is unacceptable. I was hoping it would end differently, and that the faith shown would pay off, but it was not to be."
Former England and United captain Rio Ferdinand said Van Nistelrooy's appointment as interim manager was a "dream case scenario".
"He (Van Nistelrooy) won't say that, but this has played out the best way possible for him," Ferdinand said.
"He comes in, in the background, denying any kind of knowledge of wanting to be the manager, any desire to be the manager, thinking: 'if this guy lets up, if he doesn't produce, I'm sitting in the wings waiting to take over'.
"He's got a calming authority. I've seen him in the camp. The players like him, they respect him, I've spoken with a number of the players and they've loved working with him so far."
Match of the Day presenter Gary Lineker said the club has been a "bit of a shambles" since Ratcliffe's investment.
"They seemed to go for Thomas Tuchel but he didn't take the job, then they subsequently went back to Ten Hag," Lineker told The Rest is Football podcast.
"I suppose there was a degree of eventuality about this."
Newcastle legend Alan Shearer agreed with Neville that the dismissal was inevitable.
The former England striker said: "We were just waiting for it to happen. Even the way he was talking that 'we're all on the same page'.
"Well, they weren't really on the same page because everyone knew they were talking to managers in the summer.
"If they're on the same page why on earth are they speaking to managers in the summer? As soon as that came out we all said he was a dead man walking, unfortunately."
How did we get here?
Ten Hag's first season at Old Trafford was a success.
After successive defeats by Brighton and Brentford in his first two matches in charge, Ten Hag grew into the role.
Victory against Newcastle United in the Carabao Cup final ended the club's six-year silverware drought, while they were beaten in the FA Cup final by Manchester City.
A third-place finish in the league was seen as a platform to build on but Ten Hag's second season was dismal. United ended eighth - their lowest position in the 32-year history of the Premier league
June's FA Cup final victory against rivals Manchester City salvaged Ten Hag's position, with the club deciding to stick with him following an end-of-season review.
Emboldened by his contract extension, Ten Hag continually said that he was "on the same page" as the club's board.
But results did not match Ten Hag's rhetoric.
After an opening weekend win against Fulham at Old Trafford, United were beaten by a last-minute Brighton goal.
Victory against newly-promoted Southampton followed but a dismal 3-0 home defeat by Tottenham on 29 September came after draws against Crystal Palace in the Premier League and Twente in the Europa League.
The pressure on Ten Hag's position was building before the October international break and Ratcliffe was present at Villa Park as United drew 0-0 with Aston Villa.
The club's board met during the international break and provided no update on Ten Hag's future, insisting nothing had changed.
But one win in the three matches since has forced the hand of United's owners, bringing to an end the Dutchman's two-and-a-half years at Old Trafford.
Ten Hag's reign in numbers
- Ten Hag’s 54.6% win record is the second-best of any United manager since Sir Alex Ferguson’s retirement – behind only Jose Mourinho’s 58.3%.
- After 85 Premier League games in charge, Ten Hag had accrued one more point (146 points) than Sir Alex Ferguson managed in his first 85 league matches (145 points)
- However, Ten Hag lost 31.8% of matches in all competitions, second only to David Moyes' record of 32.4%.
- United conceded 165 goals during Ten Hag's tenure in all competitions. Only West Ham (180) conceded more in that time.
- Man United have conceded three or more goals in 24 different games in that time, the joint most along with Bournemouth.
- United conceded four or more goals in a single match on seven occasions under Ten Hag.
- The club finished with a negative goal difference of -3 last season, the first time the club has recorded a negative goal difference in a Premier League season.
- Ten Hag lost 27 Premier League games as United manager. A quarter of those (25.9%) were lost to goals in the 90th minute or later, including West Ham on Sunday
- United have lost nine Premier League games to 90th-minute goals in their entire history. Seven of those were during Ten Hag's 85 games in charge.
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