Valencia’s board wielded the axe overnight, Australian time, following the club’s third successive league defeat to Celta Vigo on March 20.
“I would like to thank Valencia Football Club, the fans, staff and the players,” the former Manchester United captain said in a statement.
“I would have liked to have continued the work I started but understand that we are in a results business and in the 28 games they have not been to my standards or to those which are required by this club.”
Valencia won only 10 games under Neville, drawing seven and losing the other 11.
The club said assistant coach Pako Ayestaran will take over the squad until the end of the season.
Ayestaran had been with Valencia as an assistant from 2001-04, when it won two Spanish league titles and a UEFA Cup trophy.
He later became an assistant coach with Liverpool, helping the English club win the 2005 Champions League and the 2006 FA Cup.
He then worked as head coach for Maccabi Tel Aviv in Israel and Santos Laguna and Estudiantes Tecos in Mexico.
Neville was in his first head-coaching job. He spent much of his post-Manchester United playing career as a TV pundit before taking the part-time coaching role with England in 2012. He is expected to rejoin the England squad ahead of the upcoming European Championship in France.
Neville leaves Valencia 14th in the Spanish league standings, only six points above relegation zone.
After Neville took over in December, Valencia went 12 games without a win in the Spanish league. They won two in a row in February, but just once since.
Help our journalists uncover the facts
In times like these InDaily provides valuable, local independent journalism in South Australia. As a news organisation it offers an alternative to The Advertiser, a different voice and a closer look at what is happening in our city and state for free. Any contribution to help fund our work is appreciated. Please click below to donate to InDaily.