The 47-year-old signed a three-and-a-half-year deal with the Championship club in October 2011 but has been sacked following a takeover by the Al Hasawi family.
It is thought that Cotterill met with the club's new owners on Wednesday and, after lengthy discussions, the Kuwaiti-based group have decided to appoint a manager who better suits their long-term plans.
|ON THE UP?
|12/1||Nottingham Forest are 12/1 to win the Championship in 2012-13 with Paddy Power|
"The club will be making no further comment at this time."
Forest avoided relegation by 10 points last season under Cotterill's guidance, after he succeeded former England boss Steve McClaren at the City Ground following a disastrous start.