Pearson led the Foxes to the Championship title last season, but his team have picked up just 17 points from their opening 24 matches of the current campaign.
The 51-year-old former Newcastle Utd coach was involved in a bizarre incident in Saturday's 1-0 home defeat by Crystal Palace.
He was knocked over on the touchline by Palace midfielder James McArthur after a tackle by Marc Albrighton, resulting in what was initially a friendly exchange between the Foxes boss and Scottish player.
Pearson even playfully grabbed McArthur around the throat before helping him to his feet, only to then prevent him from returning to the pitch by grabbing hold of his shirt.
Former Leicester striker Gary Lineker, now host of BBC show Match of the Day, wrote on Twitter: "Not overly surprised that Nigel Pearson has been fired by Leicester, given they're bottom, but he's been a very good manager of the club.
"Not sure if yesterday's bizarre touchline behaviour had anything to do with Pearson's exit, but certainly shows how the job gets to 'em all."