It brings to an end Scolari 's second tenure at the club after a 3-1 defeat to Vasco da Gama on Wednesday night left the side struggling in the relegation zone, seven points adrift of safety.
Palmeiras had only managed to take 24 points this season leaving them in 19th position in the table which has spelt the end of "Big Phil's" reign.
A statement on the club's website read: "In a meeting which took place this afternoon between the president, director of football and coaching staff, it was decided by mutual agreement to end the contract between Luiz Felipe Scolari and the club."
"Palmeiras thank the coach for his services; he is one of the greatest leaders the club has had in all of its history."
The 63-year-old was previously in charge back in 1997 and led the Brazilian outfit to the championship, Libertadores Cup and Copa do Brazil in three years.
But he returned in July 2010 and was only able to achieve a mid-table finish in last season.