The Kuwaiti-based Al-Hasawi family assumed control of the npower Championship club on Tuesday and have wasted little time in implementing their plans for the Reds. Cotterill leaves just nine months into the three-and-a-half-year deal he signed when replacing former England head coach Steve McClaren in October.
A statement on the club's official website, nottinghamforest.co.uk, said: "Nottingham Forest can confirm that manager Steve Cotterill has departed the club with immediate effect."
It continued: "Mr Cotterill met with the club's new owners, the Al-Hasawi family, yesterday [Wednesday] and after long deliberations they have decided to make a new appointment in a bid to deliver their long-term vision.
"The club would like to acknowledge their gratitude to Mr Cotterill for guiding it through an extremely difficult and traumatic period and for retaining the side's Championship status last season.
"The club will be making no further comment at this time."
Cotterill left Portsmouth to take over at the City Ground on October 14, 2011 after a compensation package was agreed with Forest's fellow Championship strugglers.
The Reds were 21st in the table when he arrived and battled against relegation for the remainder of the campaign, with Cotterill eventually securing survival and a 19th-place finish.
The former Cheltenham and Notts County boss had to contend with crippling financial constraints during his tenure, as well as the death of the club's owner Nigel Doughty in February.
The Al-Hasawi family took control of Forest this week after reaching terms to buy the controlling stake left by Doughty.
Source: PA
Source: PA