That result left the Swabians at the foot of the table without a single point all season and the departure was confirmed on Stuttgart's official Twitter feed.
They are also in danger of being eliminated from the Europa League after going down 2-1 to Rijeka in the first leg of their play-off tie last Thursday.
An emergency managerial meeting led to Labbadia being dismissed along with his assistant Erdinc Sozer.
A press conference will be held to discuss the decision while potentially a new coach could be presented with only three days to prepare for the crucial second leg of their Europa League play-off.
Labbadia took over in December 2010, guiding them to safety in his first season and to sixth and a place in the Europa League the following term.
They struggled in the Bundesliga last year, but reaching the DFB-Pokal final and qualifying once again for the Europa League saved Labbadia's job, however defeats to Mainz, Bayer Leverkusen and Augsburg have cost him his job just three games into the new Bundesliga season.