Davies' position came under increasing pressure in the wake of the humiliating 5-0 rout by Derby on Saturday which continued their recent miserable run of form.
The Sky Bet Championship club confirmed the Scot's departure on Monday lunchtime after widespread speculation that his reign had been brought to a close.
A statement on Forest's official website read: "Nottingham Forest Football Club have confirmed the termination of manager Billy Davies' employment.
"The club thank Mr Davies for his efforts during his second spell as manager since his re-appointment in February 2013 and wish him well for the future."
And owner and chairman Fawaz Al Hasawi said: "I would like to place on record my gratitude to Billy Davies for all his efforts as manager of Nottingham Forest. I wish him all the best for the future.
"I am aware many people expect me to announce a new manager imminently, but I must stress the need for patience as I make the important decision of who takes the reins at this crucial stage of the season.
"As always, I will keep our supporters informed of any developments but in the meantime I ask everyone to get behind our academy manager Gary Brazil as he takes charge of first-team affairs until a permanent appointment is made.
"Supporters can rest assured the local and national Press will have regular access to whoever is appointed as our new manager as with immediate effect any bans imposed on members of the media are lifted. I hope the club can now look forward to an enjoyable, positive relationship with the Press."
Forest have taken just three points from their last seven Championship fixtures and have now slipped out of the play-off places with just nine games of the campaign remaining.
Davies, who signed a new four-year contract last October, was in his second stint at the helm of the Sky Bet Championship side, having returned to the City Ground in February 2013.
The former Motherwell, Preston and Derby boss saw his first spell in charge come to a close in June 2011, before being reappointed by Al Hasawi.
Just to make things worse, the Football Association confirmed later on Monday Davies had lost his appeal against a three-match touchline ban, which he will have to serve at his next club.
Davies has already served a two-match ban after admitting one charge of misconduct for using abusive language towards referee Anthony Taylor after the 2-2 draw with Leicester at the City Ground on February 19.
However, his appeal against the ruling that he deliberately made contact with Taylor in the tunnel was rejected on Monday.
Meanwhile, you can listen to our interview as FL72 pundit Garry Birtles tells Sky Sports News Radio that Davies has dragged the name of Nottingham Forest through the gutter.