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Claudio Borghi has been sacked as Chile coach following their 3-1 friendly defeat to Serbia in St Gallen on Tuesday night, their fifth straight loss.
The ANFP confirmed the news in a statement on their website.
"The board of the National Association of Professional Football (ANFP), taking into account the recent performances of the Chilean national team and considering the requirements to qualify for the World Cup in Brazil in 2014, has following the match with Serbia terminated the contract with Claudio Borghi in order to maximise the chance of achieving that goal."
Chile were comfortably beaten by Serbia, who went 3-0 up before Manchester United youngster Angelo Henriquez scored his first goal in Chile colours three minutes from time.
Henriquez had been 15th minute replacement for Barcelona's Alexis Sanchez who went off injured, while Chile also lost Arturo Vidal to a second-half red card.
The Argentinian Borghi took over from Marcelo Bielsa in February 2011.
Chile sit sixth in the South American qualifying group for the World Cup, but are level on points with Venezuela who sit fourth, the last of the automatic qualifying slots.
The next round of matches are in June.