The 52-year-old returned to the City Ground, where he enjoyed considerable success as a player, in the summer and was expected to mount a promotion challenge.
However, despite a promising start to the season following a hefty summer spending spree, it has been a disappointing campaign and Saturday's 1-0 home defeat to Millwall was their sixth defeat in seven matches and left them with just one win in 11.
And after meeting with owner Fawaz Al Hawasi on Sunday afternoon, Pearce has been relieved of his role, but has been offered an alternative position with Forest.
A club statement read: "After long discussions between owner and chairman Fawaz Al Hasawi and manager Stuart Pearce, the club has decided that Stuart will be relieved of his role as manager with immediate effect.
"Mr Al Hasawi has offered Stuart an alternative role at the club, which he is currently considering.
"The club will be making no further comment at this time."
Pearce was appointed as Billy Davies' successor towards the end of last season, but did not take up his role until the summer.
Source : PA
Source: PA