Vincenzo Montella still had two years left on his contract, but was dismissed after dismal campaigns at the FIFA World Cup and in the UEFA Nations League.
According to Turkish media, Montella will receive severance pay equal to five months' wages, about €1 million.
Montella, 52, joined Turkey in 2023 and led them to their first European Championships in eight years. At Euro 2024 in Germany, Turkey reached the quarterfinals - their best result since 2008 - but were eliminated by the Netherlands.
The Italian manager kept Turkey on track following the Euros and became the first foreign manager to take the team to the FIFA World Cup, the country's first in 24 years. Turkey arrived with high hopes, but crashed out of the tournament in the group stage after losing to Australia (2-0) and Paraguay (1-0).
In Turkey's debut in League A of the UEFA Nations League, a group with Belgium, France, and Italy proved too competitive, with Turkey losing their first four games and already looking set for relegation.
Montella lost 6 of his final 7 games in charge of Ay-Yildizlilar.
Montella oversaw a sharp rise in the FIFA World Rankings, taking Turkey from 42nd in September 2023 to 22nd in 2026, their highest position in ten years.
In his 40 games in charge, Montella led Turkey to 21 wins and 14 defeats.
Shakhtar Donetsk manager and former national team captain Arda Turan is reported as a potential successor to Montella.