He successfully steered the club away from relegation to finish mid-table but Allardyce will not be in charge next season.
The move comes as a result of fan discontent at the style of football on offer at Goodison Park.
The former England manager was brought in last Novemeber to replace Ronald Koeman but his failure to win over the fans led to his downfall.
Speculation suggests that Marco Silva, who was in charge of Watford, is likely to be his replacement.
A statement from the club, released on their Twitter account, read: "On behalf of the chairman, board of directors and Mr Moshiri, I’d like to thank Sam for the job he has done at Everton over the last seven months.
"Sam was brought in at a challenging time last season to provide us with some stability and we are grateful to him for doing that.
“However, we have made the decision that, as part of our longer-term plan, we will be appointing a new manager this summer and will be commencing this process immediately".
16 May 2018