The 45-year-old departed Turf Moor with immediate effect following talks with the club over his future. Burnley announced on Thursday that former caretaker boss Mike Jackson will take charge for the final four matches of the season, starting with Friday night's trip to Leeds.
Burnley confirmed the decision in an official statement, thanking Parker for his "professionalism, dedication and contribution" during his time at the club.
The Clarets have already started the search for a new permanent manager ahead of the 2026/27 campaign.
Parker arrived at Burnley in the summer of 2024 after Vincent Kompany's exit and enjoyed a remarkable first season in charge. He guided the club straight back to the Premier League after a dominant Championship campaign which included a 31-match unbeaten run and 30 clean sheets.
But Burnley struggled badly on their return to the top flight. They have managed only four league victories this season, and relegation was confirmed following last week's defeat to Manchester City at Turf Moor.
Speaking after his departure, Parker reflected proudly on his time at the club.
"It has been an immense privilege to lead this great club over the past two years," he said.
"I reflect back with great pride on what we achieved, especially our unforgettable promotion season in 2024/25, and it was a true honour to lead this team into the Premier League."
Parker also thanked the club's ownership, staff, players and supporters for their backing during his spell in charge.
"Finally, thank you to the Burnley fans. I wish you all and this great club nothing but the very best for the future," he added.
Burnley have already been linked with Wales manager Craig Bellamy, although reports suggest he remains fully committed to leading Wales into Euro 2028 and no contact has been made by the club so far.
Jackson will now attempt to lift spirits during Burnley's final fixtures against Leeds, Aston Villa, Arsenal and Wolves as the club prepares for another Championship campaign.
Crystal Palace manager Oliver Glasner has challenged his side improve following the 3-1 victory against Shakhtar Donetsk in the Europa Conference League semi-final first leg in Krakow on Thursday.
Liverpool FC head coach Arne Slot has admitted his side can still reach a much higher level despite winning their last three matches, as Liverpool prepare for a huge Premier League trip to Manchester United on Sunday.
Atletico Madrid are expecting to have Julian Alvarez, Giuliano Simeone and Alexander Sorloth available for next week's Champions League semi-final second leg against Arsenal after injury fears eased following the first meeting in Spain.
Unai Emery has blasted VAR after Nottingham Forest claimed a narrow 1-0 win over Aston Villa in the first leg of their Europa League semi-final at the City Ground on Thursday.
