Stewart Regan, Scottish FA Chief Executive, confirmed in a statement that U-21 manager Billy Stark will be caretaker boss, taking charge of a friendly match against Luxembourg later this month, until a permanent appointment is made.
“We are taking this decision with real sadness," said Regan. "Craig has worked hard to bring success, and has been thoroughly professional in his approach to the job. He has achieved a great deal with the team and in other areas, such as the Performance Strategy. However, he would be the first to agree that football is a results-driven business.
“For that reason we have relieved Craig of his duties with immediate effect. Billy Stark will take interim charge of the team for the friendly against Luxembourg. There will be a short delay in announcing that squad, which Billy will select, and we have informed the Luxembourg FA of this development.
"We will shortly announce an interim replacement for the Under-21 squad ahead of their match against Portugal next week.
“After the Luxembourg match, the Board will meet to begin the process of identifying and recruiting the next National Coach to take us forward. We will give ourselves time, given our fixture schedule, to find the right person for the job.
“The challenge for the squad now is to improve our position in Group A and, subsequently, improve our position in the FIFA rankings. We also must begin preparations for the UEFA European Championships in France in 2016, which for the first time will have 24 qualification places available.”
The seven-man SFA board had been deliberating for several days over whether the former Hearts and Dundee United manager should keep his job after a poor start to the World Cup qualifying campaign, with Scotland sitting bottom of their group with two points from four matches.
Scotland are ranked 56th in the FIFA rankings, 10 places worse off than when he accepted the job in 2009.
Levein's contract ran until 2014 and it is reported that sacking him will cost in the region of £700,000.
Scotland face Luxembourg in an away friendly on November 14 and do not have another qualifier until hosting Wales on March 22.