The Manchester City board finally lost patience in Pearce after almost sacking him in March.
Club chief executive Alistair Mackintosh said: “The board of directors would like to thank Stuart for his hard work and service. We wish him well for the future.”
It is believed Paul Jewell, who quit Wigan today, will be among the frontrunners for the job at City.
Pearce will now be favourite to take over the England Under-21 team as FA want a full-time boss for next season.