The news was announced on Sunday afternoon, around 24 hours after the 3-0 home defeat by Sheffield Wednesday at the City Ground.
Freedman, in charge for around 13 months, won 19 of his 57 matches as Forest boss and leaves with the club in 14th place in the Championship, the same position as when he took over from Stuart Pearce.
He worked under a transfer embargo throughout his time with the Reds and had some success in the overseas market with the likes of Nelson Oliveira.
The Scot could also point to the injuries suffered by his highest-profile players, Britt Assombalonga and Henri Lansbury.
Ultimately, however, the nature of the defeat by the Owls has prompted the club to end Freedman's time in charge.
First-team coach Paul Williams will take over as manager until the end of the season.