The Uruguayan has been in charge at the Stadium of Light for 17 months after taking over from Paolo Di Canio, but the club have now confirmed he has been dismissed after crisis talks on Monday.
Poyet, who oversaw a shambolic 4-0 home defeat by Aston Villa on Saturday, took training at the Academy of Light before being told of his fate, leaving the Black Cats just a point above the relegation zone with just four wins all season.
Chairman Ellis Short released a short statement via the club's official website, confirming the decision.
In it he made reference to Poyet's successful fight against the drop last term, as well as an unexpected run to the Capital One Cup final, but expressed disappointment at slipping once again into a survival scrap.
"I would like to thank Gus for his endeavours during his time at the club, in particular last season's 'great escape' and cup final appearance, which will live long in the memory of every Sunderland fan," said Short.
"Sadly, we have not made the progress that any of us had hoped for this season and we find ourselves battling, once again, at the wrong end of the table. We have therefore made the difficult decision that a change is needed."
The statement added that an announcement about Poyet's successor would be made "in due course".