A club statement said Icelandic chairman Eggert Magnusson and the board "had been concerned by the performances in recent weeks and felt it is the right time to make a change".
Pardew replaced Glenn Roeder in October 2003 after an acrimonious split from Reading. He steered West Ham to ninth place in the Premier League and the FA Cup final last season, having secured promotion via the playoffs in 2005.
Their second season back in the top flight has proved a huge disappointment, however, and Saturday's 4-0 thumping at Bolton Wanderers was their fifth defeat in six league games, leaving them two points adrift of the safety zone.
Earlier in the season West Ham lost eight matches in a row in all competitions, a run that included an early exit from the UEFA Cup before the group stages and a humiliating League Cup defeat by third division Chesterfield.
"Alan has made an important contribution since joining as manager in September 2003 but this season's results have been disappointing and have left the Club in a very difficult position," the club statement said.
"Mr Magnusson and the Board would like to place on the record their thanks to Alan Pardew for his hard work and commitment and to wish him well for the future.
"The search for a successor is now under way in order that a new manager can be in place for the January transfer window."
West Ham agreed to an 85 million pounds takeover by an Icelandic consortium headed by Magnusson on November 21, a deal that appeared to strengthen Pardew's position.
The club beat Sheffield United in the first match after the announcement, but an away defeat at Everton, followed by a home loss to Wigan Athletic and Saturday's dismal performance at Bolton has changed the mood from one of optimism to gloom.
West Ham have just 14 points from 17 matches and have managed only four wins, all at home. They have not scored in their last seven league matches away from Upton Park.
BAD LUCK
Pardew suffered a slice of bad luck when the club's record signing Dean Ashton broke his ankle in August while on England duty, ruling him out until at least January.
He also struggled to get the best out of Argentine striker Carlos Tevez, who came to the club in the August transfer window along with fellow international Javier Mascherano. Tevez still has not scored for the club.
Pardew's fall from grace has been drastic.
Acknowledged as one of the brightest young managers operating in the Premier League, he steered West Ham to the FA Cup final against Liverpool in May and, but for a spectacular last-gasp equaliser by Steven Gerrard, his side would have won.
The final, regarded as one of the best in recent times, ended 3-3 before Liverpool won it on penalties, although West Ham still secured a UEFA Cup place as runners-up.
Before the FA appointed Steve McClaren to replace Sven-Goran Eriksson, Pardew was even mentioned as a possible England manager.
Former Charlton Athletic manager Alan Curbishley, who had a distinguished career with West Ham in the 1970s, has been installed as favourite to replace Pardew.
First team coach Kevin Keen has been placed in temporary charge of team affairs.
