The Clarets who are currently 18th in the log have lost five of their last six top-flight games.
Dyche was the longest-tenured manager in the Premier League having taken over at Turf Moor in October 2012.
Confirming Dyche sacking Burnley chairman Alan Pace said it was "an incredibly difficult decision" to part company with the 50-year-old, but "we feel a change is needed".
Burnley suffered a 2-0 to Norwich City, who are bottom of the Premier League in their last league clash.
Dyche's assistant Ian Woan, first-team coach Steve Stone and goalkeeping coach Billy Mercer have also left the club.
"Firstly, 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," said Pace.
"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.
"Under-23s coach Mike Jackson, assisted by academy director Paul Jenkins, Under-23s 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.
"The process of replacing Sean has begun and further announcements will be made to supporters in due course.
Dyche had penned a new four-year contract until 2025 with Burnley in September last year.
During his term at the club he guided them to two promotions from the Championship and two top-half Premier League finishes.
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