The 42-year-old's exit had been widely predicted after owner Vincent Tan last week sent him an email demanding he resign or be sacked.
That ultimatum was briefly lifted when chairman Mehmet Dalman stated Mackay would be in charge for the "forseeable future", but the 3-0 Boxing Day defeat against Southampton proved the ex-Watford boss' last in charge.
A statement on the Cardiff website read: "The Board of Directors at Cardiff City Football Club have today relieved Malky Mackay of his duties.
"A new first team manager will be appointed and announced in due course."
Mackay had always insisted he would not resign, and this had long appeared to be the only realistic outcome of his dispute with Tan that first came to light when head of recruitment Iain Moody was dismissed in October.
Even Dalman's statement that Mackay would remain in charge came with the caveat that there would need to be a reconciliation between owner and manager.
Mackay had twice requested a meeting with Tan and Dalman earlier this week in order to discuss their differences, but the Scot revealed the Malaysian had turned them down.
Talks had been due to be held on Saturday, when Cardiff face Sunderland, but in the end Mackay did not last long enough.
Mackay, who has been linked with the vacancy at West Brom, had launched a staunch defence of his performance as manager, which Tan sternly criticised in his email ultimatum, following the defeat to the Saints.
He had said: "Overall this football club is competing well in the Premier League this season.
"We are not in the bottom three at around the halfway stage.
"Myself and my staff knew exactly how tough this was going to be this season, as did the players and the media.
"We are competing well, there are games we should have won, there are games we should have done better in.
"This is a season where I firmly believe we can stay in this league and build on it."
Mackay had guided the Bluebirds to the League Cup final in 2012 and the Championship title in 2013. They lie 16th in the Premier League, one point above the relegation zone at the time of his departure.
Former Manchester United striker and Molde manager Ole Gunnar Solksjaer is among the favouties to replace Mackay, while Sven-Goran Eriksson and Turkish journeyman Yilmaz Vural have also been suggested as potential candidates.
Earlier on Friday, Vural's agent had mischievously tweeted that ''explosive'' events lay ahead at Cardiff.
Muzzi Ozcan tweeted: ''The story is coming to a End in Wales and a new story will be born ... The next 48 hours will be explosive !''
When news of Mackay's sacking broke, he added: "New page has been turned over as I said .... Wish the best for MM."
Possible contenders for the post
It is assumed Sven has the sort of worldwide gravitas Tan is looking for and, having travelled the globe in pursuit of work, may have no qualms in throwing his lot in with Cardiff. Currently with Guangzhou R&F but could he resist another shot at English football?
The lifelong fan has ended his playing career with the club and played a key role as they eventually made it to the Premier League. Nothing suggests he would want the job but, if he is keen on a career in coaching, perhaps this could be his chance.
Turk Vural has managed more than 20 clubs in his homeland and was recently linked with a move to Cardiff. The club denied being in contact with the 60-year-old but his name refuses to go away.
Initially sacked by Tan in 2011 after consistently failing to deliver promotion, he is now out of work after losing his job at Sheffield Wednesday. It would take a significant thawing of relations for him to get the position, but he is certainly available and has been linked.
OLE GUNNAR SOLSKJAER
Another product of Sir Alex Ferguson's managerial academy, Solksjaer has earned a fine reputation with Molde in his home country of Norway, winning the league twice and the cup once. Would certainly be attracted by the Premier League but it remains to be seen if mentor Ferguson would advise him to stay away.