The 50-year-old has overseen a disappointing start to his second season in charge at the Stadio Olimpico, with the Biancocelesti currently sitting in mid-table in Serie A.
He is set to take over the reins of the Switzerland national team in the summer once Ottmar Hitzfeld steps down and the club has seen fit to dispense with his and his back-room staff's services.
"Lazio announce that they have terminated the employment contract of Vladimir Petkovic, Antonio Mancione and Paolo Rongoni," a club statement reads. "The club announce that they have installed coach Edoardo Reja, who will be assisted by Alberto Bollini and Adriano Bianchini."
Lazio's last match was a 4-1 loss to newly-promoted Hellas Verona and the club begins action after the winter break with a tough game against Inter in Rome on Monday.
Reja, 68, has enjoyed a long coaching career with a variety of sides and led Lazio to fifth and fourth-placed finishes during his spell at the club between 2010 and 2012.