Tony Mowbray is among the early favourites for the Birmingham job following Wayne Rooney’s sacking.
Rooney spent just 83 days in the hot seat following the controversial decision to dismiss John Eustace. The Blues were sixth in the Championship table at that stage.
Chief executive Garry Cook said in an official statement: “We are committed to doing what is necessary to bring success to St Andrew’s.
“Unfortunately, Wayne’s time with us did not go as planned and we have decided to move in a different direction.
“The search for a successor begins with immediate effect and we will update supporters when we have further news."
The 3-0 defeat at Leeds on New Year's Day proved to be the final straw for Rooney, with Birmingham slipping to 20th place.
"I would like to thank Tom Wagner, Tom Brady and Garry Cook for the opportunity to manage Birmingham City and the support they all gave me during my short period with the club," said the former England striker.
"However, time is the most precious commodity a manager requires and I do not believe 13 weeks was sufficient to oversee the changes that were needed.
"Personally, it will take me some time to get over this setback.
"I have been involved in professional football, as either a player or manager, since I was 16. Now, I plan to take some time with my family as I prepare for the next opportunity in my journey as a manager."
Steve Spooner will take interim charge of the side. The Blues head to the MKM Stadium to face Hull in the FA Cup third round this weekend.
Mowbray was sacked by Sunderland a month ago despite leading the Black Cats to the play-offs last term. He was replaced by Michael Beale at the Stadium of Light.
The former Rovers chief has been named as a potential candidate to succeed Rooney at St Andrew's along with the likes of Steve Cooper, Jesse Marsch and Gary Rowett.
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