The 56-year-old has been shown the door at Ashton Gate with the Robins languishing in 22nd place following their relegation from the Championship last season.
City have won only two matches this term and have just 15 points from 18 matches, although they did hold high-flying Leyton Orient to a 2-2 draw in O'Driscoll's final match in charge on Tuesday.
O'Driscoll, who has previously managed at Bournemouth, Doncaster, Crawley and Nottingham Forest, replaced Derek McInnes as Bristol City boss on a 12-month rolling contract on January 14 this year.
He was in charge for a total of 44 games with a record of 11 wins, 13 draws and 20 defeats during that time.
In an e-mail to supporters revealing the news of O'Driscoll's departure, the club's vice-chairman Jon Lansdown wrote: "We have given the situation as much time as we could to improve but have become increasingly concerned about the club's league position and have decided that a change of head coach will give the club the best possible chance of improving this.
"The league table does not lie. We are currently in the relegation zone and have been there for most of the season. This is not acceptable and the board feels that it needs to take action to try and rectify this; we need to move to ensure that results on the pitch keep up with progress off the pitch.
"It is vital that we now look to appoint a head coach who buys into our strategy and can help us to continue to grow and develop it successfully. This, of course, includes results on the pitch.
"This is an important decision and one which we will take careful consideration and diligence in making."
Assistant head coach John Pemberton will take charge of the first team for Saturday's visit to Preston North End.