The decision came after a 2-1 home defeat to Cagliari on Sunday, a result that summed up a disappointing end to the season. Milan finished fifth in Serie A, falling short of their main objective after spending much of the year in the title race.
Allegri, who had returned to the San Siro for a second spell after previously managing the club between 2010 and January 2014, saw his side win just one of their final four matches as form collapsed at the worst possible moment.
In a strong statement confirming his dismissal, the club said: "The final stretch was completely inconsistent with the performance up to that point, with last night's disappointing loss in the final game turning the season into an unequivocal failure."
The statement also confirmed that preparations for next season were already under way. "Further announcements regarding the next appointments will be made in due course - with the goal to be ready and well prepared for next season," it added.
For long periods, Milan had looked set for a strong finish, but a late downturn in results ultimately cost Allegri his position. Despite the setbacks, the team had been involved in a sustained Serie A title challenge before their form unravelled.
Attention has already turned to potential replacements, with outgoing AFC Bournemouth boss Andoni Iraola emerging as a leading candidate.
Iraola ended his spell in England in impressive fashion, guiding Bournemouth to Europa League qualification for the first time in their 127-year history after a sixth-place finish in the Premier League. The club also completed the season on an 18-match unbeaten run.
The Spaniard, previously linked with the Manchester United job before they opted to continue with Michael Carrick, has earned widespread praise for his attacking and progressive style since arriving from Rayo Vallecano in June 2023.
Milan are now expected to move quickly as they look to reset ahead of next season following a campaign that ended in frustration and disappointment.
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