Connor took the managerial reins when Mick McCarthy was sacked last season, but was powerless to prevent the club being relegated to the Championship.
He had taken on the role of Stale Solbakken's assistant when the Norwegian took charge for the new campaign, but Wolves have now announced his departure just four games into the new season.
|WOLVES MAKE A KILLING|
|14/1||Wolves are 14/1 with Bet365 to win the Championship this season|
The club released a statement on their official website, saying: "Terry Connor’s contract as Assistant Manager of Wolves has today been terminated with immediate effect.
"Terry has been at the Club for 13 years working in a number of different roles during that time, including a stint as Manager during the second half of the 2011/2012 Season.
"He leaves Wolves with the very best wishes and thanks of everyone at the Club. A fuller tribute to Terry’s long-standing service to Wolves will be paid in due course."
Wolves are currently languishing in 19th place in the Championship, with just one win in four games after a 3-1 defeat to Cardiff on Sunday.