Pearson has been replaced by Hayden Mullins as interim boss for relegation-threatened Watford’s final matches against Manchester City and Arsenal.
“Watford FC confirms that Nigel Pearson has left the club with immediate effect,” a statement read.
“Hayden Mullins, with Graham Stack as his assistant, will take up the position of interim head coach for the Hornets’ final two Premier League fixtures of the 2019/20 season.”
Former Crystal Palace midfielder Mullins had been working as Watford’s Under-23s coach.
Pearson is the third manager to be sacked by the Hornets this season, following the departures of Javi Gracia and Quique Sanchez Flores.
Watford are in 17th place, three points above the relegation zone ahead of Tuesday’s visit from City, with third-from-bottom Aston Villa having two games left and second-from-bottom Bournemouth just one.
The decision to axe Pearson is a big surprise after the 56-year-old hauled Watford off the bottom of the table following his arrival in December.
After taking over with the club nine points adrift, he oversaw a resurgence that included a 3-0 win over Premier League champions Liverpool and a victory against Manchester United.
Recent wins against Norwich and Newcastle had given Watford breathing space over the bottom three.
But British media reports claimed Pearson was dismissed following a heated discussion with Watford owner Gino Pozzo after Friday’s dismal 3-1 defeat at fellow strugglers West Ham.
It is believed Pearson learned of his sacking at Watford’s training ground yesterday lunchtime, with the players said to be shocked by the decision.
Watford’s board were thought to be keen on Pearson’s assistant Craig Shakespeare taking over for the last two matches, but the former Leicester boss is reported to have refused out of loyalty to his manager.
Only last week, Pearson had spoken of his desire to extend the short-term deal he signed with Watford last year.
“Both Craig and myself, when we joined, our intention was to do what we can this year to retain our status and then go from there,” Pearson had told Sky Sports.
“I’ve really enjoyed working here and yeah I would love to stay if the circumstances are right and all parties are in agreement.”