Allen guided the Kent club to promotion as champions last term and Saturday's 2-0 defeat at Shrewsbury, which followed back-to-back wins, left them 17th with nine points.
But it was not good enough for Gills chairman Paul Scally, who has axed the 48-year-old former Brentford and Notts County chief after 16 months in charge.
Scally told the club website: "It is always a hugely difficult time when a managerial change occurs and this moment is no exception.
"Whilst the decision taken was made unanimously by the board, it was an exceptionally difficult one, but one which after long deliberation was felt absolutely necessary.
"I would like to wish Martin every success in his future career, I have no doubt he will be back managing very shortly and I have very much enjoyed the experience of working with him, on both a business and personal level over the past 16 months."
@dannyjohnson Gillingham have by and large been quite skint for a long time. I also thought this was harsh because when you look at the teams they have played already, they've lost to a relegated team and a playoff team from last year, two midtablers and Coventry, who would be 4th if they hadn't had a deduction. Only the Bradford defeat might be disappointing. On top of that, they've drawn with a playoff team, a relegated side and even beaten MK Dons. I know it's the same for everyone but most of those sides are going to be in a different part of the table to the Gills come the end of the season. It's a shame for Allen, I don't think he gets the credit he deserves as a manager, but he's the latest in a line of popular Gills managers who the chairman has seen fit to get rid of.- quoththeraven