Ling had been absent from the League Two club since January and it was later revealed that he had been diagnosed with a stress-related illness.
Alan Knill took over from Ling on a caretaker basis and oversaw the Gulls' narrow escape from relegation, which was only confirmed with their 3-3 draw against Bristol Rovers on the final day of the season.
Knill has remained in Torbay on holiday but the Gulls did not immediately announce a permanent successor for Ling, who had been with Torquay since the start of the 2011-12 season.
Ling led Torquay to the play-offs last season, when they lost to Cheltenham in the semi-finals, and they started 2012-13 well before sliding into a horror run of form that started a couple of months before the news of his illness was made public.
A club statement read: "The Torquay United board has decided to terminate the contract of manager Martin Ling with immediate effect.
"The decision is based purely on footballing grounds, after falling from play-off contenders last season to just escaping relegation this time around, and early exits in all three cup competitions.
"Everyone at Plainmoor would like to thank Martin for his work over the last two years and we wish him every success in the future."
Gulls captain Lee Mansell said on Twitter: "Good Luck to Martin, he was a great gaffer. I have a lot of time for him and I have a lot to thank him for."