The 43-year-old leaves the club after a run of poor form which sees the club out of the FAI Cup and all but out of the running for the Premier Division crown
Having joined Sligo in February 2012, Baraclough enjoyed a successful period with the club. In his first season, the former Scunthorpe United boss steered the club to their first Premier Division title since 1977.
A third place finish in 2013 was complemented by triumph in the FAI Cup and the club lifted the Setanta Sports Cup for the first time in 2014.
However, despite winning the all-Ireland competition, a series of poor results this season have seen the club fall behind their rivals in the league, where they sit 17 points behind league leaders Dundalk in fifth place.
Sligo also failed to defend their FAI Cup trophy, exiting the second round at the hands of Dundalk at the beginning of June.
In a statement released on the official Sligo Rovers website, the club thanked Baraclough for "his enormous contribution" and said that his tenure at the Showgrounds was a "memorable period".
"The club wish to express our gratitude to Ian for his enormous contribution at Sligo Rovers since joining in February 2012," the statement read.
"In winning a first league title in 35 years, securing a fifth FAI Cup and a first ever All-Ireland crown, Ian’s partnership with the club has been a memorable period for the Bit o’ Red, one that will forever be part of a glorious era in our history.
"We also thank Gary Stevens for the imprint he leaves on the club in both coaching of the team and his work in the community behind the scenes. We wish them both every success in the future."