In a perfect example of how quickly fortunes can change in football, Cotterill leaves with his side in 22nd place and having not won in seven matches.
Yet the 51-year-old was a hero last season as Bristol City won the Johnstone's Paint Trophy and stormed to the League One title.
Assistant manager John Pemberton, formerly reserve team boss at the City Ground, takes caretaker charge as he did when Colin Calderwood left Nottingham Forest in December 2008 and guided the Reds to wins at Norwich and then Manchester City in the FA Cup before Billy Davies took over.