Blackburn, who lost 2-1 at Lancashire neighbours Bolton Wanderers on Sunday, are 10th in the standings, their finishing position last season and five places better than where they ended in 2009.
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Newcastle United sacked Chris Hughton last week when they were 11th in the standings, the first Premier League managerial departure of the season.
Speculation was rife that Allardyce would follow after a run of overnight bets which caused bookmaker William Hill to slash the odds of him being the next manager to go from 33-1 to 3-1.
"We have taken this decision as part of our wider plans and ambitions for the club. We would like to put on record our thanks to Mr. Allardyce for his contribution," said a statement on the club's website.
IMMEDIATE EFFECT
Allardyce's assistant Neil McDonald will also leave with immediate effect and assistant coach Steve Kean will take over first-team duties.
Blackburn were bought by Indian poultry giant Venky's for 23 million pounds last month
Allardyce, a no-nonsense centre-back in his playing days, managed Blackpool and Notts County before spending eight years at Bolton.
He moved to Newcastle United in 2007 but lasted less than a season and joined Blackburn in December 2008 following the six-month tenure of Paul Ince.
"I am very shocked and disappointed to be leaving Blackburn Rovers," Allardyce said in a statement on the website of the League Managers' Association.
"I am extremely proud to have managed this club and I enjoyed a fantastic relationship with the players, my staff and the supporters during my time in charge. I now wish them and the football club every success for the future."
Richard Bevan, chief executive of the LMA said: "When new owners take over a club, sadly, the manager's position often hangs by a thread. To Sam's great misfortune this has now happened twice and, on both occasions, it has been extremely difficult to understand the thinking behind the dismissal."
NEWS:Allardyce shocked and disappointed by sacking
