The manager has been relieved of his duties with the Turkish club following a disappointing start to the campaign.
The 60-year-old Terim, who recently took charge of the Turkey national team, was relieved of his duties following a disappointing start to the campaign in his third stint as coach of the club. Galatasaray president Unal Aysal had previously revealed concern about Terim's refusal to accept a two-year deal with the Turkish outfit in conjunction with his venture with the country's national team.
"After Fatih Terim's rejection to our two-year contract offer, Galatasaray board have been obligated to find new solutions," a club statement said. "All these developments regarding this issue were harmful to our club and its values. Our board have a responsibility to preserve this values and transmit to next generations.
"By force of this responsibility, in order to prevent our club from getting damaged more, Galatasaray board decided to terminate Fatih Terim's contract.
"We thank Fatih Terim for his contributions and we would like everyone to know that we will be proud of his future achivements with Turkish National Team."
Terim oversaw the signings of Didier Drogba and Wesley Sneijder, which have so far yielded mixed results, given the vast amount of investment spent in the two players. This season, Galatasaray has taken six points from four league games and suffered a 6-1 hammering in their Champions League Group B opener against Real Madrid at home, with Cristiano Ronaldo scoring a hat trick.
Former Manchester City manager Roberto Mancini is said to be an early candidate to replace Terim at the Turk Telecom Arena.