The club's president Maurizio Zamparini, who is notorious for being trigger happy, has removed the former Milan midfielder from his position after just seven matches in charge
The AC Milan legend, 35, was named Palermo coach at the start of the 2013-14 campaign, but has now been removed from the position following the Sicilians' disappointing start to life in Serie B, with seven points taken from six games.
"It's with deep regret that we inform you Gennaro Gattuso has been relieved of his duties as head coach. We regret this decision because we hold Gattuso and his great commitment in high esteem," a statement on the club's official website reads.
"Unfortunately, we have together made a wrong decision for his first experience as head coach at a demanding club like Palermo. The results have proven us wrong.
"We have given Giuseppe Iachini the task to bring Palermo back to Serie A."
Palermo were beaten 2-1 by Bari on Tuesday evening and currently sit 12th in the Serie B table.
Iachini, a former coach for Siena, has a good track record at Serie B level, steering Chievo, Brescia and Sampdoria back to the top flight in previous seasons.