A run of six league matches without a win has seen the Shakers slip to 21st in the Sky Bet League Two table and Bury moved to turn around their fortunes by parting company with Blackwell on Monday morning.
The former Sheffield United boss, who took over at Gigg Lane in September 2012, was unable to prevent Bury's relegation to League Two last campaign, but was given time to change things for the better.
Blackwell, 54, bought in over 20 players in the summer transfer window but has failed to arrest Bury's poor run and becomes the third Football League manager to lose his job in four days after David Weir and Martin Allen left Sheffield United and Gillingham.
In a statement on Bury's official website Day said: "When I started the role at Bury, I knew that there would be decisions to be made that would not always be easy.
"As a board we had to make one of those decisions, and terminate the employment of Kevin Blackwell.
"We would like to thank Kevin for his efforts to turn this great club into a promotion winning side, but for whatever reason, the efforts off the pitch was not reflected by the performances and results on the pitch.
"As a chairman I have set high standards at this club and every effort has been made to support the first team staff and players.
"It saddened me to make this decision but was made with the best intention of the club's future.
"We have asked Ronnie Jepson to stand in as the caretaker manager and all of the current back room staff has been asked to stay as we feel that stability is the key at this stage.
"We are confident that the future is bright and ask for the continued support at this difficult time.
"I have always stated I have a five-year plan and nothing can detract from that and a such every effort will be made to make sure we are back where we belong."