"On Thursday, Jean Fernandez told the players and the management he was leaving the club," Nancy said on their website.
The club's academy director, Patrick Gabriel, would serve as interim coach for Saturday's home league game against Lille, they said.
The 58-year-old Fernandez, a former Marseille coach, joined Nancy in June 2011 from Auxerre, a club he managed to qualify for the Champions League group stage in 2010-11 despite modest resources. His success brought him the award for best coach in 2010.
Nancy, who have won only their league opener this term, are on 11 points from 19 games, eight points from safety.
The club have also been experiencing financial troubles and said they were willing to get rid of up to five players in order to cut their deficit.
They have already agreed to let winger Yohan Mollo join St Etienne on loan, while Brazilian centre back and captain Andre Luiz, who has been at the club for eight years, has broken his contract.