The U's have endured their worst start to a league campaign in their 75-year history and the Colchester board have made the decision to take action and part ways with the 61-year-old.
Ward has been at the helm at the Weston Homes Community stadium since May 2010 and has delivered back-to-back top-10 finishes in the third tier.
Chairman Robbie Cowling said on the official club website: "In so many areas, John Ward will leave Colchester United Football Club in a better position than when he first took over as manager.
"So much of Colchester United is better than it has ever been, but sadly that is not being reflected in first team results and the board has decided that this action is required to stop the negativity of the on-field results impacting on the other areas of the club that have also been drastically improved.
"I would like to thank John Ward for his time in charge. He has done more for Colchester United than many people realise, and the board of Colchester United and especially myself would like to wish him all of the very best for the future.
"Joe Dunne has agreed to take over in the short term and I am sure that everyone will give Joe their full support."