The news follows a disciplinary hearing into comments made by Barmby suggesting the club lacked ambition in the transfer market.
In a statement issued by the League Managers' Association, former England midfielder Barmby expressed his disappointment in the decision, insisting his sacking was without justification and that the club reneged on a promise to allow him a full appeal against the dismissal.
"I am obviously hugely disappointed to have been dismissed," he said. "I maintain that my sacking was entirely without justification. In everything I have done for the club I have always acted in the best interests of Hull City.
"I was told today that I had seven days within which to submit an appeal against my dismissal, and yet the club has now made an official statement, on behalf of the board, stating publicly the alleged reasons for my dismissal, and indicating that the search for a new manager will begin immediately.
"I nevertheless intend to appeal. As the matter is subject to an appeal, and, if necessary legal proceedings, it would not be appropriate for me to make any further comment at this stage, despite the fact that the club has seen fit to go public with its version of events."
In a long statement, Hull's vice chairman Ehab Allam said: "The reason for the dismissal relates to certain comments made by Nick in recent interviews. The comments concerned were wholly misleading and implied that the board had not made funds available to Nick to strengthen the first team squad during the January transfer window.
"Such is not only completely untrue, the comments made by Nick contradicted the board's publicly stated position that funds would be made available to Nick during the January transfer window.
"As stated in previous interviews, the board accepted every transfer request from Nick and in fact actively encouraged him to strengthen the squad should he feel it was necessary."
Allam added: "The club feels that it has treated Nick entirely fairly and in the same way that it would have treated any other employee in the same situation."
Last week it was reported that the club had suspended him over comments he made about the club's financial situation.
Barmby won 13 of his 33 matches at the KC Stadium, as the Tigers finished eighth in the Championship, seven points off the play-off places.
Hull sacked director of football and former chairman Adam Pearson last week, with the owners terminating his consultancy role "without notice and without compensation". Pearson was described by Barmby, in his controversial comments, as "the heart and soul of the club".