President Maurizio Zamparini confirmed on the club’s website that the former Rangers midfielder had left the club.
In a statement, he said: “It’s with great sadness that I write to say that I have relieved Gennaro Gattuso of his duties as first-team manager.
“Unfortunately for both me and him, we might have bitten off a little bit too much for his first experience as manager, at a club with a demanding public like Palermo’s. Results have shown that we were wrong (to offer Gattuso the job).”
Gattuso, a former Italy international and AC Milan midfielder who arrived from Sion in June after a disappointing time as player-coach last season, was fired by the trigger-happy Zamparini after losing 2-1 at Bari on Tuesday.
Palermo, relegated from Serie A last season, are languishing in 12th place after winning two of their opening six games.
The club said Gattuso would be replaced by Giuseppe Iachini, who managed Siena last season until leaving after they too were relegated to Serie B.