The 61-year-old manager has been dismissed after the Black Cats fell to a 1-0 defeat against Manchester United, leaving them just one point clear of the relegation zone
O'Neill, who took over at the Stadium of Light in December 2011, has been dismissed with immediate effect, with the club confirming that news on his successor will follow.
"The club has parted company with manager Martin O'Neill," a statement on the club's official website read. "Sunderland AFC has announced that it has parted company with manager Martin O’Neill this evening.
"The club would like to place on record its thanks to Martin and wishes him well for the future.
"An announcement will be made in the coming days regarding a successor."
Sunderland will now be preparing for their imminent fixtures without O'Neill as they face Chelsea, Newcastle, Everton and Aston Villa in the coming month, before concluding the season with games against Stoke, Southampton and Tottenham.