The Scot oversaw the club's worst campaign in the Premier League era and missed out on Champions League qualification, and leaves Old Trafford just a season into his six-year deal
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Announcing Moyes' departure on their official Twitter account, United added: "The club would like to place on record its thanks for the hard work, honesty and integrity he brought to the role."
Moyes had endured a torrid campaign in charge of the reigning Premier League champions, with Sunday's abject 2-0 loss to former club Everton guaranteeing that the Red Devils will miss out on a place in the Champions League next season.
Defeat at Goodison Park was their 11th of the season - just one fewer than relegation battling West Brom - and left the club languishing in seventh place in the table.
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Moyes had been handpicked by Sir Alex Ferguson to take over upon his retirement, urging those in attendance of his final match at Old Trafford to "stand by our new manager".
But with United having struggled so much under Moyes, the club's hierarchy were increasingly worried that he was no longer the right man to entrust this summer's £200 million warchest to.
Veteran midfielder Ryan Giggs could take over first-team duties for the remainder of the season, while there is even speculation that Sir Alex could return to the dugout he vacated just a year ago.