The 46-year-old, who led England to the final of Euro 2009, has paid the price for a disappointing Euro 2013, where they were eliminated in the group stages after failing to win a single match.
FA General Secretary Alex Horne said: "Hope deserves a lot of credit for her commitment to developing the national teams over such a long period.
"The high point was undoubtedly reaching the UEFA European Championship final four years ago.
"However, after the disappointment of the recent tournament in Sweden, the Club England Board believe the time is right to make a change and for a fresh outlook.
"I'd like to place on record the organisation's thanks to Hope for her efforts and wish her every success in the future."
Powell was appointed as England coach in June 1998 and became the first woman to earn a UEFA Pro Licence in 2003.
In 2007 she led England to the World Cup finals, their first appearance in the competition in 12 years, and two years later they reached the final of the European Championships, where they lost to Germany.
England reached the quarter-finals of the 2011 World Cup and achieved their highest-ever FIFA ranking of sixth, but Powell came in for criticism after last month's Euros.
Defeats to Spain and France sandwiched a draw with Russia, leaving England bottom of Group C.
Horne said: "It is important we continue this development at major tournaments so we can compete, with Germany, France, Spain and the Nordic countries in Europe in addition to the likes of Japan, Brazil, the United States and Canada at the 2015 FIFA World Cup.
"We will now look to recruit a new Head Coach and a Technical lead for Women's football who will report to Dan Ashworth. We will be speaking to people from across the game both domestically and internationally before making any appointments."