McClaren, who succeeded Nigel Clough as boss at the iPro Stadium in September 2013, has already turned down Newcastle twice (in January and May).
Derby led the Championship in March but a wretched run of form saw them eventually finish eighth and miss out on a play-off place.
"Derby County have terminated the contract of head coach Steve McClaren with immediate effect," a statement on the club's website read.
"The decision follows a thorough review of the 2014/15 season by the club's board of directors.
"The board believes that the appointment of a new Head Coach is required to continue the club's on-field progress and the search is now underway to appoint a successor.
"The board remains firmly committed and driven to achieving promotion to the Premier League.
"The club would also like to take this opportunity to wish Steve McClaren well for the future and thank him for his work throughout his tenure, which included a Play-Off Final appearance in 2014."
"I'm very disappointed with the decision, especially as I have on three occasions reiterated my commitment to Derby County Football Club," McClaren said.
"The club means a huge amount to me, and I was not looking to leave. While we were all unhappy with the way the season ended, I still believe real progress was being made.
"After taking over a side that was in 14th place at the end of September 2013, we had a fantastic run through to the play-off final last year.
"Despite the bitter blow of losing in the manner we did at Wembley, the side bounced back and we enjoyed an excellent run until the last two months of the season when we we were hit by injuries to key players.
"That was the major reason we were not able to maintain our promotion push.
"I do not believe or accept that rumours linking me to the Newcastle United job were a factor in the team's performances this year, as had been alleged.
"Attendances were up to the highest average for a season since the team was in the Premier League, and the largest in the Football League Championship during the past season.
"I wanted to remain with the club and was confident in leading the side to a successful season next year.
"However, I have to accept the club's owner,Mel Morris, wants to take a new direction.
"I'd like to thank Chief Executive Sam Rush for giving me the opportunity at Derby and the staff and players for their loyalty and efforts.
"Importantly I would also like to pay tribute to all Derby supporters for their outstanding support over the past two seasons.
"While I look for a new managerial challenge, I'd like to wish everyone at the club and the supporters every success in the future."