Despite winning the Copa Brasil just two months ago, the Sao Paulo based outfit are mired in relegation danger and seven points from safety.
Scolari has been touted as a possible replacement for Mano Menezes as national team coach before the 2014 World Cup which Brazil host.
“In a meeting which took place this afternoon between the president, director of football and coaching staff, it was decided by mutual agreement to end the contract between Luiz Felipe Scolari and the club,” said Palmeiras.
“Palmeiras thank the coach for his services. He is one of the greatest leaders the club has had in all of its history.”
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Summer 2016 is set to be a very exciting time for football fans, as this is when the long awaited Euro 2016 tournament kicks off.
Since Guus Hiddink arrived at the helm, Chelsea have improved considerably after a tricky start to the campaign.