The 39-year-old Keane, who had been at Ipswich since April 2009, leaves with the club sitting 19th in the 24-team league after seven defeats in their last nine games.
Keane won 28 and lost 28 of his 81 games in charge of the Tractor Boys since taking over from Jim Magilton.
The former Ireland midfielder's departure comes less than a week before Ipswich host Arsenal in the first leg of their League Cup semi-final.
Keane said: "I’m hugely disappointed to be leaving Portman Road. Results haven’t been as good as I’d have hoped so far this season and when results aren’t good the manager gets the sack, that’s the game.
"However, I have a genuine belief that we were making progress and that the players have what it takes to turn this season around. We were preparing well for our visit to Chelsea on Sunday and then our Carling Cup semi with Arsenal.
"Getting to that semi proves what I know the team is capable of. I was also working hard to build the squad during the transfer window, looking at our options to attract new players to the club.
"I have loved my time at Ipswich, living locally to the club with my family, and have a massive respect for the club, its staff, the fans and the community and I wish them well."
First-team coach Ian McParland will take charge at Stamford Bridge.
"We have taken the decision now to terminate his contract having reached the halfway point in the season," chief executive Simon Clegg told a news conference.
"As he (Keane) has said himself on a number of occasions, the performances on the pitch since November have simply not been good enough. In spite investment in the playing staff and a lack of improvement on the pitch, the results speak for themselves."
It is unclear whether a new manager will have been appointed by the time the Gunners visit Suffolk.
"I hope to be in a position to make an announcement regarding the new manager over the coming days," said Clegg.
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