Also on the way out of Ewood Park was Allardyce's assistant, Neil McDonald, with first team coach Steve Kean placed in temporary charge.
A statement issued by Venky's, the Indian-based poultry business that took over the north-west club last month, said: "The Venky's Group, owners of Blackburn Rovers Football Club, has today (Monday) confirmed the departure of manager Sam Allardyce and assistant manager Neil McDonald with immediate effect.
"First team coaching duties will be taken on by Steve Keane (currently first team coach) for the immediate future.
"We have taken this decision as part of our wider plans and ambitions for the club. We would like to put on record our thanks to Mr Allardyce for his contribution to Blackburn Rovers Football Club."
A stunned Allardyce, in a statement issued via England's League Managers' Association (LMA), said: "I am very shocked and disappointed to be leaving Blackburn Rovers.
"I am extremely proud to have managed this club and I enjoyed a fantastic relationship with the players, my staff and the supporters during my time in charge. I now wish them and the football club every success for the future."
LMA chief executive Richard Bevan said Allardyce, as happened when he was at Newcastle, had paid the price for being in the post when the club had been sold.
"When new owners take over a club, sadly, the manager's position often hangs by a thread," Bevan said.
"To Sam's great misfortune this has now happened twice and, on both occasions, it has been extremely difficult to understand the thinking behind the dismissal."
Rovers lost 2-1 away to Lancashire rivals Bolton, the club where Allardyce made his name as both a player and manager, in the league on Sunday even though Bolton played for most of the match with just 10-men.
But despite that defeat Blackburn remained five points clear of the bottom three and in no immediate danger of being drawn into a relegation battle.
Allardyce's exit came just over a week after top-flight Newcastle, sacked Chris Hughton as their boss and days after England manager Fabio Capello tipped Allardyce and Tottenham Hotspur's Harry Redknapp as his potential successors.
"In this moment Allardyce and Redknapp are doing very well because they have different players, they have good style and get results with them," Italian boss Capello said.
And Bevan added: "It is ironic that one minute Sam can be proposed as the next England manager and the next, he finds himself out of work."
Allardyce's departure comes nearly two years to the day since he took over as Rovers manager on a three-year contract on December 17, 2008.
His first season saw Blackburn finish 15th in the league and in January he took them to the semi-finals of the English League Cup, where they lost 6-4 on aggregate to Aston Villa.
They then finished the Premier League season in 10th place.