The Cavaliers have stumbled to a 16-33 record, after six straight losses, to sit fourth-last in the 15-team Eastern Conference standings and there have been rumblings of dissent among the players.
"This has been a very difficult period for the franchise. We have severely underperformed against expectations," Cavaliers owner Dan Gilbert said in a statement.
"There is no one in our entire organization who is satisfied with our performance, and to say that we are disappointed is an understatement," Gilbert added.
"We believe a change in leadership was necessary to establish the best possible culture and environment for our entire team to flourish."
Cleveland's most recent defeat was their most embarrassing, going down 119-108 on Wednesday at home to the injury-hit Los Angeles Lakers, who had arrived in Cleveland on a seven-game losing streak and had only enough players to finish the game when Robert Sacre was permitted to play under a little-used NBA rule after fouling out.
David Griffin, Cleveland's vice president of basketball operations, has been appointed acting general manager.
Grant, who joined the franchise in July 2005, was named general manager of the Cavaliers on June 4, 2010 following Danny Ferry's resignation.
"My entire focus the past eight years has been on trying to build a team that can contend and win and provide Cleveland fans the success that they deserve," said Grant.
But he has come under increased criticism this season.
Many questioned his decision to select rookie Anthony Bennett, the No. 1 pick in the 2013 NBA Draft who has made a slow start in Cleveland, while his drafts in previous years of Dion Waiters and Tristan Thompson were also widely panned.
Since the departure of 10-time All-Star James and Grant's start as general manager, the Cavaliers have posted an unimpressive record of 80-199.
"Chris always conducted himself with class, integrity and was motivated by what he believed was right for the organization, Gilbert said in thanking Grant. "We wish Chris and his family the best in the years to come."
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