The League One club find themselves seven points clear of the relegation places and the same margin adrift of the play-off pack with just under half of the season remaining.
Eight defeats from the last 13 league games proved Wilson's downfall as his second spell in charge at Oakwell came to an end ahead of the weekend trip to second-bottom Crawley Town, having also represented the Yorkshire side during his playing career.
"Danny will always be welcome back at Oakwell," said a statement confirming the departure of Wilson, who guided Barnsley into the Premier League in the 1990s.
"The success he brought during his initial period with the club is unrivalled and the club will be forever grateful for his achievements.
"However, recent performances and results have been concerning, considering the club currently boasts the fifth highest wage bill in League One in addition to a fourth highest equity donation by our owner.
"Meanwhile, our current league position of 17th is in stark contrast to an average home gate of sixth-best in the division. Whilst the club acknowledges there has been a large turnover of players, the league position is still unacceptable considering all of the above."
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