The 13-year playoff drought, which began after the team's last playoff trip in 2011, is the longest in the NHL.
The Sabres (39-37-6, 84 points) also fired assistant coach Jason Christie and video coordinator Matt Smith. The Sabres have had six head coaches since Lindy Ruff took them to the playoffs.
Granato was 122-125-27 in 274 games. He replaced Ralph Krueger on March 17, 2021.
In 2022, Granato received a two-year contract extension that hadn't even kicked in yet. He is under contract through the 2025-26 season.
"I would like to thank Don for his time in Buffalo and commitment to the Sabres organisation," general manager Kevyn Adams said in a team statement. "He has been integral in the development of many of our players and has undoubtedly been the right coach to bring us to where we are now, but I felt it was necessary to move in a different direction at this point in time.
"My expectation is to be a consistent contender and unfortunately that goal has not been met... This is not a decision I take lightly but know it is in the best interest of our team moving forward."
Granato's tenure ended Monday with a 4-2 win against the Tampa Bay Lightning. The Sabres finished sixth in the Atlantic Division.
The Sabres were last season with a 42-33-7 record and missed the playoffs by one point. The team is tied with the New York Jets for the longest playoff drought in the four major sports.
Granato became the eighth NHL coach to be fired this season, following Jay Woodcroft (Edmonton Oilers), Dean Evason (Minnesota Wild), Craig Berube (St. Louis Blues), D.J. Smith (Ottawa Senators), Lane Lambert (New York Islanders), Todd McLellan (Los Angeles Kings) and Ruff (New Jersey Devils).
