The decision to remove the 47-year-old Dutt from his position was taken after Saturday's Bundesliga loss at home to his former club Freiburg and was confirmed by the club at a press conference the following morning.
"We had to act and to make a statement to pursue our goal of international football for next seasen with fresh energy," Leverkusen director Wolfgang Holzhaeuser told reporters in Leverkusen.
Consequently, Hyypia has now been appointed as boss on an interim basis and will be assisted in his new position by youth team coach Sascha Lewandowski.
"I know the team and firmly believe in it," said the Finn, who joined Leverkusen from Liverpool in 2009 before retiring last year to take up a coaching role with the club.
"We - Sascha Lewandowski and I - want to show Bayer Leverkusen how to get back on track.
"It is an unsettled team that has not taken its chances in recent weeks. But, having been at the club for the past three years, I have an advantage in that I know the players."Leverkusen appeared to be well in contention for a fourth-placed finish after upsetting Bayern Munich at the start of last month but they suffered a dramatic collapse after suffering a humiliating 7-1 defeat in the second leg of their Champions League last 16 tie with Barcelona, losing four on the bounce in the Bundesliga.
Their dreadful dip in form generated great unrest among the club's fans, while it is believed that Dutt's strained relationships with influential midfielders Michael Ballack and Simon Rolfes also contributed to his downfall.
Dutt only took charge of Leverkusen last summer, having replaced the Bayern Munich-bound Jupp Heynckes at the helm, but had previously been reported that Leverkusen had planned to dismiss him at the end of the current campaign anyway.