Saturday's home defeat to Wigan left Sunderland 16th in the Barclays Premier League, just two points above the relegation zone.
Bruce had insisted he had no intention of walking away from the Stadium of Light, despite fans calling for his head at the weekend.
Ellis Short: "This has been a difficult time for everyone at Sunderland and is not a situation that any of us envisaged or expected to be in.
"It is my job as chairman to act in the best interests of our football club at all times and I can assure everyone that this is not a decision I have taken lightly.
"Sadly results this season have simply not been good enough and I feel the time is right to make a change.
"Steve has acted with honesty and integrity throughout, which is testament to the character and commitment he has shown during his time at Sunderland.
"I would like to personally place on record my thanks to him for his significant contribution to our football club over the past two and a half years and everyone here at Sunderland naturally wishes him the very best for the future.
"I would also like to thank our fans, who have endured a trying start to the season. Their support continues to be the driving force behind our club and is vital as we now look to the future."
Assistant manager Eric Black will take charge of the team while the search for a new manager begins.
Former Aston Villa manager Martin O'Neill - a boyhood Sunderland fan - is the early favourite to replace Bruce, ahead of the likes of Mark Hughes and Rafael Benitez.