Koeman was dismissed after a 1-0 defeat by Rayo Vallecano left the team sitting ninth in La Liga.
Barca have won only two of their last seven league games under Koeman, a run that included losing to Real Madrid in Sunday's Clasico at Camp Nou.
A poor start to the season has raised the possibility of the team failing to qualify for next season's Champions League, which would have enormous consequences for the club's already dire financial situation.
Xavi, who is currently in charge of Qatari club Al Sadd, is considered Koeman's most likely successor.
Barcelona B coach Sergi Barjuan could take charge of the first team on an interim basis, with games against Alaves, Dynamo Kiev in the Champions League, and Celta Vigo to come before the next international break.
River Plate coach Marcelo Gallardo and Ajax's Erik ten Hag have also been linked with Barcelona but might be reluctant to leave their respective posts mid-season.
A club statement released after midnight in Spain on Wednesday read: "FC Barcelona has relieved Ronald Koeman of his duties as first team coach.
"The president of the club, Joan Laporta, informed him of the decision after the defeat against Rayo Vallecano. Ronald Koeman will say goodbye to the squad on Thursday at the Ciutat Esportiva.
"FC Barcelona wishes to thank him for his service to the Club and wishes him all the best in his professional career."
Koeman spent six years at Barcelona as a player and is considered a club legend after scoring the winning goal in the 1992 European Cup final against Sampdoria.
He was appointed coach by Barca's previous president Josep Maria Bartomeu in August 2020 and enjoyed some success in his first season, winning the Copa del Rey and bringing a disillusioned Lionel Messi back onside.
But a disappointing finish in La Liga and a convincing defeat by Paris Saint-Germain in the Champions League last 16 cast doubt over Koeman's ability to navigate the biggest games, a criticism that was aimed at him again last weekend following the loss to Real Madrid.
- 1.35 billion euros debt -
Laporta was re-elected as president in March and while he allowed Koeman to continue as coach this season, there was never much trust between the pair.
Laporta told Koeman in the summer he wanted two weeks to look for a replacement while Koeman reacted badly last month to Laporta suggesting coaches do not have all the power.
"He spoke too much," Koeman said.
No replacement was found or could be persuaded to take over, perhaps in part because of Barcelona's perilous financial problems.
The club is 1.35 billion euros in debt and had to watch Messi join PSG in August after failing to renew the Argentinian's contract.
Other key players like Antoine Griezmann also departed without being adequately replaced as Sergio Aguero and Memphis Depay both arrived on free transfers and Luuk de Jong came from Sevilla on loan.
"The team has lost balance in the squad, lost very effective players, which shows," said Koeman after his last game in charge against Rayo. "In recent years other clubs have strengthened every season and we haven't, which also shows."
Koeman's honest approach was largely accepted and even appreciated last season but his downbeat assessment of his squad this term was seen by many as counter-productive and not befitting of a Barcelona coach.
Youngsters like Pedri, Gavi, Nico Gonzalez, Sergino Dest and Ronald Araujo have all benefitted from Koeman's faith but more established players have suffered a drop in form.
Frenkie de Jong, who knew Koeman from his time in charge of the Dutch national team, has endured a particularly disappointing few weeks.
There was criticism of Koeman's style of play, which became increasingly direct, while the board were reportedly irritated by his straying from the club's traditions of playing 4-3-3.
But results were the key factor, as consecutive 3-0 defeats by Bayern Munich and Benfica in the Champions League were followed by losses against both Atletico and Real Madrid in the league.
Laporta said before the international break Koeman "deserved the benefit of the doubt", moving to end speculation that he would lose his job after the defeat by Atletico.
But faced with an early exit in the Champions League and the possibility of failing to make the top four in La Liga, Laporta, who was at Vallecas on Wednesday night, decided to act.