Adams arrived at the Utilita Energy Stadium in June, just weeks after he won promotion to Sky Bet League One with Morecambe via the play-offs.
Since his arrival he has only managed to earn nine wins from 37 games in charge at the West Yorkshire club.
Chief executive officer Ryan Sparks said: "On behalf of the board, it is with deep regret that we have come to the decision to part company with Derek Adams.
"A sustained period of consideration has led to this decision and it is felt that, with all things taken into account, the club must move in a different direction with regards to the role of first-team manager.
"We would like to thank Derek for his efforts while at Valley Parade, and wish him the very best for the future."
Pressure was mounting on the Bradford board to take action after 15,000 home fans saw their side lose to promotion-chasers Exeter at the weekend.
The former Ross County manager, who also had a spell as assistant manager at Hibs, departs Bradford just eight months after he signed a three-year deal with the club.
The Bantams are in 11th position in the League Two table and find themselves eight points behind the play-off spots heading into the final third of the season.
The club confirmed on Tuesday morning that assistant manager Mark Trueman will take caretaker charge of the first-team with immediate effect, and will lead the group for Bradford's away clash with Oldham on Saturday.
Adams himself responded to the pressure building on his future in his final post-match interview with BBC Radio Leeds, after the Exeter loss.
"If they're going to get a new manager in they're not going to get a manager as successful as myself in the door," he said.
"That's obvious to everyone, because my record is up there with everyone's in League Two.
"If they want to do that, then that's up to the football club, but I came to Bradford City from a League One club, to a League Two club to try to help them get out.
"I took a risk coming to this club. I gained promotion with Morecambe last season and Plymouth Argyle a few seasons before.
"When a football club is down on its luck for so many years, it's a difficult thing to turn very quickly.
"We put pressure on ourselves by saying we want promotion out of this league this season, but we still want to do that."