The Avalanche were beaten 3-1 at home by the Minnesota Wild on Saturday to end the season rock bottom in the 15-team Western Conference with a 16-25-7 record.
"The organization believes a change of leadership behind the bench is needed going forward," Colorado general manager Greg Sherman said in a statement.
"Joe has worked for this franchise for eight seasons and he is a dedicated and hard-working coach. We appreciate all he has done and wish him the best in the future."
Sacco, 44, was appointed as head coach of the Avalanche in June 2009 and took them into the playoffs in his first season in charge.
He had a 130-134-30 record with the team in his first NHL head coaching assignment.
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