Ludogorets, who have won back-to-back league titles, slumped to a 1-0 loss on Saturday to newcomers Lyubimets 2007, whose home town has a population of less than 8,000.
"Ivaylo Petev is no longer coach of Ludogorets," the club said in a statement. "The decision was taken after consultations immediately after the match in Lyubimets.
"Ludogorets is considering several applications to be new head coach and an announcement will be made in the coming days."
Petev, 38, took charge at Ludogorets in 2010 and also led them to the Bulgarian Cup and the domestic Super Cup in 2012.
The Razgrad-based club put Petev's assistant Georgi Dermendzhiev in temporary charge as they host Slovan Bratislava in the return leg of their Champions League second qualifying round tie on Wednesday.
Slovakian champions Slovan won the first leg 2-1 after scoring twice in the last five minutes.