
Leicester splashed out more than 10 million pounds (16 million dollars) in transfer fees in the summer but have struggled for consistency this season.
A 3-0 defeat on Saturday at home to lowly Millwall left Leicester in 13th place, though they are only five points off automatic promotion.
The club's Thailand-based owners Asia Football Investments met Monday afternoon to discuss ending the Swede's one-year stay at the King Power Stadium.
Eriksson's departure was confirmed on the club website.
Leicester were in the relegation places when Eriksson, having just finished a stint with the Ivory Coast national team, replaced Paulo Sousa as manager in October 2010. He guided them to 10th place last season.