The Football League's bottom club suffered a last-gasp 2-1 loss to non-League Blyth on Friday, with 38-year-old Murray paying the ultimate price after less than two months at the helm.
Murray made 105 appearances in three years during his playing days for Hartlepool, but the north-east club have shown no sentiment in giving him his marching orders along with assistant boss Willie Donachie.
Coach Sam Collins has taken over on a caretaker basis for the second time this season, having also stepped up to the role when Colin Cooper was sacked at the start of October.
A statement on the club's official website said: "Hartlepool United can announce that manager Paul Murray and assistant manager Willie Donachie have been released from their contracts.
"Sam Collins has been placed in temporary charge of first team affairs.
"The club will be making no further comment at this time."
Hartlepool are bottom of League Two with only 12 points from 19 games and are six points adrift of safety.
The Victoria Park outfit head to promotion hopefuls Burton Albion next Saturday.
