A former Serbia coach, Djukic was hired in June to replace Ernesto Valverde but his side are mired down in ninth in La Liga with just under half the season played and Sunday's 3-0 defeat at Atletico Madrid appears to have been the last straw for the Valencia board.
"The reason for today's news conference is to announce in the name of Valencia and the board of directors, and this is a day that personally I would have preferred never to see arrive, the dismissal of Miroslav Djukic as first team coach," president Amadeo Salvo told a news conference on Monday.
Sporting director Francisco Joaquin Perez Rufete said the club were seeking a replacement and B team coach Nico Estevez would take charge in the meantime.
A former Yugoslavia centre back, Djukic spent six seasons at Valencia as a player and had stints at Deportivo La Coruna and Tenerife.
As a coach, he helped Real Valladolid win promotion back to the Spanish top flight in the 2011-12 season and after they finished in 14th place last term he announced he was moving on.
He is well known in Spain for missing a penalty late in Depor's final match of the 1993-94 season against Valencia which handed the title to Barcelona.
"As is normal for a professional I don't agree with the board's decision but I respect it," Djukic told Monday's news conference.
"I wish them all the possible luck and urge unity so the club can move forward," the 47-year-old added.
Valencia are through to the last 32 of the Europa League, Europe's second-tier club competition, where they will play Ukrainian side Dynamo Kiev.