The decision was made in the wake of a 4-1 loss at home to Crystal Palace on Saturday, which leaves Leicester 12th in the Premier League, eight points above the relegation zone.
A Leicester statement read: "The club would like to thank Claude for his efforts in leading the team during his 16 months in the role and wish him well in his future career.
"Assistant Manager Jacky Bonnevay also departs with the club's best wishes.
"First-team coaches Mike Stowell and Adam Sadler, supported by the club's established backroom staff, will assume responsibility for the senior squad while the club begins the process of appointing a new manager.
"The Board will make no further comment until this process is complete."
Puel was widely praised for his dignified conduct earlier in the season when Leicester were dealing with the death of owner Vichai Srivaddhanaprabha, whose helicopter crashed as it left the stadium after the West Ham game on October 27.
The club memorably won the Premier League title under Claudio Ranieri in 2016 but the Italian was sacked the following season.
His replacement was Craig Shakespeare, who was in charge until October 2017, when Puel took over and guided Leicester to a ninth-place finish.
Source Sky Sports
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