After the Championship club's 1-0 defeat to rivals Nottingham Forest on Saturday, the 47-year-old is relieved of his duties, having spent four-and-a-half years at Pride Park
The 47-year-old, who took on the role in 2009, has seen his side lose their last three matches in all competitions.
The Rams' home form has been particularly concerning this season, with Clough's men winning just one of their five fixtures at Pride Park, and, after the 1-0 loss at Forest on Saturday, which leaves them 14th in the table, Clough was relieved of his duties.
A statement on the club's official website read: "Derby County have this evening [Saturday] announced that they have parted company with manager Nigel Clough with immediate effect.
"Clough has been in charge at the Rams since January 2009 and the club would like to place on record their thanks to him for his tireless efforts to bring stability to Derby County, and his hard work and dedication throughout his tenure.
"However, after much consideration, the board feel it is time to move Derby County forward to the next level, which will necessitate a comprehensive review of the club's football operations.
"The ownership group remain steadfastly committed to the club and maintain their desire to compete at the top end of the Championship this season.
"The search is well underway to identifying and appointing a successor, and further announcements will be made in due course."
Derby, who are yet to make an announcement about a potential caretaker manager, host Ipswich Town on Tuesday.