The humiliation by Liverpool, which followed a 6-0 drubbing by Manchester City last month, appears to have been the final straw for the Spurs chairman Daniel Levy, who delivered the coup de grace in person at the club’s training ground in Enfield.
Villas-Boas, who was able to say farewell to the players before his departure, leaves after 18 months in the post.
Bookmakers have installed Russia coach Fabio Capello as the early favorite to take over. Franco Baldini, his former assistant at England, is Spurs’ technical director, and Capello was at White Hart Lane on Sunday commentating for Italian television.
Tottenham said in a statement: "The club can announce that agreement has been reached with head coach, Andre Villas-Boas, for the termination of his services.
"The decision was by mutual consent and in the interests of all parties."
Other names linked with the post include former Tottenham striker Jurgen Klinsmann, currently coach of the United States, and a possible return for Glenn Hoddle has been mooted.
Guus Hiddink’s agent has ruled the Dutchman out of the running – he is taking over as Holland coach after the World Cup.
Cees van Nieuwenhuizen said: "I would be surprised if (Hiddink) went to Spurs. I could hardly imagine that happening.
"He has just signed a contract with Holland and he has also turned down offers from other countries recently to coach them at the World Cup so I wouldn’t take any talk of Guus going to Tottenham seriously."
Swansea boss Michael Laudrup’s agent has also insisted the Dane is committed to stay at his club until the end of the season.
Spurs are currently seventh in the table, two points ahead of Manchester United, and won their Europa League group with a 100 per cent record, scoring 15 goals and conceding just two in six games.
Villas-Boas also had a good record overall as Tottenham manager, averaging 1.83 points per league match, the highest of all Spurs bosses in the Premier League era.
The Portuguese manager did however spend heavily over the summer, to the tune of £108million with seven new players coming in as Tottenham reinvested Gareth Bale’s enormous transfer fee.
A bright start in the Premier League was not maintained however but Villas-Boas said after the Liverpool defeat he would not quit.
The 36-year-old said: "The call to make that decision is not mine, because obviously I won’t resign and I’m not a quitter.
"The only thing I can do is work hard with the players to get them back on track.
"This is a top-four squad but in our Premier League form we are not there."
Earlier, Harry Redknapp – sacked as Tottenham manager in 2012 after failing to qualify for the Champions League – had said Levy should give his successor Villas-Boas more time.
Redknapp told talkSPORT: "I think people are over-reacting too quickly. You lose a couple of games now and you’re in trouble, it shouldn’t be like that.
"You either think somebody is good at their job or not and when you appoint someone you should give them time and let them do the job."