The Foxes defied 5,000/1 odds to win the title last season but are starring relegation in the face.
The Foxes currently sit 17th in the Premier League, just one point above the relegation zone.
In a club statement Leicester described Ranieri as "the most successful Leicester City manager of all-time".
CLUB'S STATEMENT :
Leicester City Football Club has tonight (Thursday) parted company with its First Team Manager, Claudio Ranieri.
Claudio, appointed City manager in July 2015, led the Foxes to the greatest triumph in the Club’s 133-year history last season, as we were crowned champions of England for the first time.
His status as the most successful Leicester City manager of all time is without question.
However, domestic results in the current campaign have placed the Club’s Premier League status under threat and the Board reluctantly feels that a change of leadership, while admittedly painful, is necessary in the Club’s greatest interest.
Leicester vice-chairman Aiyawatt Srivaddhanaprabha said:
''This has been the most difficult decision we have had to make in nearly seven years since King Power took ownership of Leicester City.''
''But we are duty-bound to put the Club’s long-term interests above all sense of personal sentiment, no matter how strong that might be.
''Claudio has brought outstanding qualities to his office.''
''His skilful management, powers of motivation and measured approach have been reflective of the rich experience we always knew he would bring to Leicester City.''
''His warmth, charm and charisma have helped transform perceptions of the Club and develop its profile on a global scale.''
''We will forever be grateful to him for what he has helped us to achieve.''
''It was never our expectation that the extraordinary feats of last season should be replicated this season.
''Indeed, survival in the Premier League was our first and only target at the start of the campaign.
''But we are now faced with a fight to reach that objective and feel a change is necessary to maximise the opportunity presented by the final 13 games.
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