Koeman spent £54million net on new players over the summer, while cashing in on Romelu Lukaku for £75m.
But a disastrous run of one league win since August – coupled with a disappointing European campaign – has cost the Dutchman his job.
Sean Dyche is supposedly the frontrunner for the post.
A statement on Everton’s website read: “Everton Football Club can confirm that Ronald Koeman has left the Club.
“Chairman Bill Kenwright, the Board of Directors and Major Shareholder Farhad Moshiri would all like to express their gratitude to Ronald for the service he has given to the club over the past 16 months and for guiding the club to seventh place in last season’s Premier League campaign.”
Koeman leaves Everton languishing 18th in the Premier League, with just seven points from nine games.
Their hopes of securing Champions League football for next term are already all-but over.
Koeman arrived in the summer of 2016 after a successful stint at Southampton.
Everton enjoyed a strong first season under Koeman, fishing seventh in the league.
But this term has been blighted by poor performances and a disappointing Europa League campaign.
Yesterday the former Ajax manager’s misery was compounded with a 5-2 defeat at home to Arsenal.
And he expressed his frustration before the Gunners defeat that the team has struggled to balance their league duties with European fixtures.
“I think it’s a difficult situation because we did not have a usual pre-season because we had to play the last two rounds of qualification for the Europa League,” said Koeman.
“Normally you have two weeks more to prepare the team for the start of the Premier League.
“With a lot of new players it was tricky with their confidence because if you have one or two new players, I think it’s less difficult to get that formation from the beginning.
“And we had eight or nine new players and that makes it even more difficult. Everybody knows that new players need time to adapt to the Premier League, to the competitions.”
Discussing what Everton need in a new manager, club legend Leon Osman told Sky Sports: “First and foremost to stay the club, with having such a shaky start to the season the club needs to get itself back on track.
“Koeman has come under fire this season because of the fact the ambition has been raised at Everton, the expectation has been raised with the new owners coming in, the standard of player that we’re signing and the amount of players we’re signings gone through the roof to what we’re used to.
“So any manager coming in has to take that in their stride and realise that within a year or two trophies need to start coming to the club and that’s what the chairman will be looking for in his next manager.”