The board of directors made the decision on Tuesday "after analysing the current sporting situation and results", according to a brief statement on the club's Web site.
Valencia's match delegate, Salvador "Voro" Gonzalez, will take over Ayestaran's duties until a permanent successor is found, the club said.
Voro served as interim coach for part of last season between the departure of Nuno Espirito Santo and the arrival of Gary Neville.
Ayestaran joined Valencia in the middle of last season as an assistant and was promoted to head coach after the firing of Neville.
Under Ayestaran, the team posted a record of three wins, one draw and eight losses including four consecutive defeats to start the current campaign.
The club signed Ayestaran to a two-year contract during the off-season.
"Valencia Club de Futbol would like to thank Pako Ayestaran and his coaching staff for their commitment, effort and professionalism during their time in charge of the team. The Club wish him and his team the best of luck for the future," the organisation said in a statement.
Ayestaran was previously an assistant coach at Valencia in 2001-04 under manager Rafael Benitez, who guided the side to two La Liga titles and a UEFA Cup.
