A 4-1 loss to the Blue Tigers at Al Nahyan Stadium in Abu Dhabi became the final straw for the Serbian, who was appointed coach of the War Elephants in April 2017.
Teerasil Dangda scored for Rajevac's outfit but a Sunil Chhetri double and strikes by Anirudh Thapa and Jeje Lalpekhlua for India ultimately rendered the Serbian jobless.
Sunday's defeat was the latest setback for the 65-year-old and his Thai outfit following their disappointing semi-final elimination from the 2018 AFF Suzuki Cup.
Interestingly, Rajevac was handed a two-year contract extension in February last year.
"I believe that this is not the way we, not just FA Thailand, but all Thai people, were supporting this national team to play," Football Association of Thailand president Somyot Poompanmuong said in the announcement of the Serbian's dismissal.
"In this regard, I announce relieving Milovan Rajevac and some of staff from duty, and assign Sirisak Yodyadthai as interim head coach and Choketawee Promrut as his assistant for the rest of the AFC Asian Cup 2019 tournament."
Rajevac is widely remembered for steering Ghana to a historic quarterfinal berth at the 2010 Fifa World Cup in South Africa.
In 2016, he also had a brief stint with Slovenian club Rudar Velenje.