Despite leading the Rojiblancos into the last 32 of the Europa League, the 55-year-old has paid the price for the club's poor Liga form and shock Copa del Rey exit
It was claimed after last Sunday's Primera Division loss at home to Real Betis that the Rojiblancos' board had already decided to fire the 55-year-old, irrespective of the outcome of their midweek meeting with the Segunda side.
However, their embarrassing 1-0 loss at the Vicente Calderon has now sealed Manzano's fate, with the club releasing a statement on their official website on Thursday.
"The Executive Committee of Atletico Madrid, meeting today to discuss the sporting situation, unanimously decided to dismiss Gregorio Manzano as first team coach.
"This decision has been communicated to the technician, with whom we reached an agreement for the termination of his contract.
"Atletico Madrid thanks Gregorio Manzano for the work done and wishes him well for the future."
Rafael Benitez, who turned down Atletico over the summer, is said to the club's preferred candidate to take over.
However, former midfielder Diego Simeone is now in the running after parting company with Racing Club earlier in the week.
Manzano only arrived in the Spanish capital in the summer and despite leading Atletico into the knockout stages of the Europa League, he has come in from fierce criticism from the club's fans because of his side's inconsistent form in La Liga, with the Rojiblancos currently 10th in the table.