Gracia is the second Leeds manager to be sacked this season after they parted ways with American Jesse Marsch in February and the 14th Premier League head coach to lose his job in this campaign.
"We thank Javi and his team for their efforts under difficult circumstances. The remaining four games of the season will be overseen by experienced head coach Sam Allardyce," Leeds said in a statement.
Gracia took charge of Leeds in February 2023 where he recorded three wins, two draws and seven losses in all competitions.
The Spaniard has overseen a downturn in form at Elland Road, with the club losing four of their last five games - conceding 18 goals.
Allardyce has found success at the majority of his previous clubs, managing the likes of Bolton, Blackburn Rovers, West Ham, Newcastle and Sunderland. He earnt a reputation for helping struggling teams avoid relegation.
He also briefly took charge of England in 2016 for just one game before he was dismissed.
He last managed West Bromwich Albion when he took over midway through the 2020/21 season but was unable to keep them in the top flight as they dropped down to the Championship.
Former Oxford and Charlton manager Karl Robinson will join as Allardyce's assistant, with the pair taking charge of their first game on Saturday against Manchester City.
"I know it's in a lot of trouble, but I've seen a lot of trouble before," Allardyce told TalkSport.
"They are obviously very difficult games. We can all point out where the easiest one might be, but of course, there are no easy fixtures in the Premier League.
"I was shocked (to get the job). I never thought at this stage of the season...I thought there would be no jobs. The phone popped up with a name I knew fairly well, I knew what it was, and it took me two seconds to say yes."
Stopping the goals going in will be Allardyce's first priority as they have conceded almost three times per game in the last 10 league matches.
"That has to stop if we're going to get out of trouble. We're needing to score three goals every game to win. If we're left to do that, that will be impossible," he said.
"I'm doing all I can with the staff to try and get the players out of trouble."
