Ranieri, whose side are currently a point and a place above the relegation zone, leaves less then a year after clinching a remarkable title triumph.
The Foxes were defeated 2-1 by Sevilla in the Champions League earlier this week.
“Claudio led the Foxes to the greatest triumph in the club’s 133-year history last season, as we were crowned champions of England for the first time,” the statement said.
“His status as the most successful Leicester City manager of all time is without question.
“However, domestic results in the current campaign have placed the club’s Premier League status under threat and the board reluctantly feels that a change of leadership, while admittedly painful, is necessary in the club’s greatest interest.”
The board called the decision a painful one but says it feels duty-bound to make the call.
“This has been the most difficult decision we have had to make in nearly seven years since King Power took ownership of Leicester City,” vice-chairman Aiyawatt Srivaddhanaprabha said.
“But we are duty-bound to put the club’s long-term interests above all sense of personal sentiment, no matter how strong that might be.”
Assistant manager Craig Shakespeare and first team coach Mike Stowell will take over the managerial duties until a new coach is found, starting with this weekend’s Premier League match against Liverpool.
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