Batista's future at the helm of the South American giants had been a huge source of conjecture following the team's failure to go beyond the quarter-finals at Copa America while hosting the competition.
Argentina were ousted from the tournament after losing to eventual winners Uruguay on penalties, a result that followed two draws and one victory in the group stage.
Batista met with the AFA's Executive Committee earlier on Monday at the association's headquarters in Ezeiza and it was decided to cut the coach's time short. AFA's spokesman Cherquis Bialo confirmed the decision during a press conference.
"I would like to inform you that after a cordial and friendly telephone conversation between Sergio Batista and (AFA president) Julio Grondona, Mr. Batista left the decision to the selection committee," he explained.
"The committee has decided to rescind its contract with Batista and suspend the friendly match with Romania to consider who will take on the duties of the national team. There are no deadlines to decide a successor; the decision will be made in time.
"Meanwhile, the rest of the national team coaches will be reviewed and evaluated."
However, Bialo confirmed that "Batista wasn't fired" and when asked if the tactician would be given compensation as his contract was due to expire in 2014, stated: "It is an administrative matter and I cannot comment on it.
"Batista, like all the coaches in Argentina, never left to receive his payments. The coaches of the national team usually receive payment only for their work."
Former Estudiantes coach Alejandro Sabella, Paraguay boss Gerardo Martino and Carlos Bianchi, formerly with Boca Juniors and Atletico Madrid, have been linked to fill the vacancy.