The decision was taken by the Leeds board after their 1-0 defeat to Nottingham Forest on Saturday.
In a statement, the club said: "We would like to thank Jesse and his backroom staff for their efforts and wish them well for the future."
"The process of appointing a new head coach is underway and we will continue to keep supporters up to date throughout the coming days."
Rene Maric, Cameron Toshack and Pierre Barrieu will also leave the club who have not won in the league since November.
Marsch took over as Leeds' manager in 2022 and kept them in the Premier League on the final day of last season, but results have not improved this campaign leading to his sacking.
Marsch has previously coached RB Leipzig, New York Red Bulls and Red Bull Salzburg.
Leeds will play third-placed Manchester United at Old Trafford in the league on Wednesday before facing their rivals again in the reverse fixture on Sunday.
Leeds are level on 18 points with third-bottom Everton and have a game in hand on all the teams around them.
