The Dutchman was informed of the club's decision on Sunday morning in the wake of a 3-1 defeat at home to SC Freiburg.
Paying the price
The club have picked up just two points from their last six Bundesliga outings having been second in the table with 20 points from their first nine games of the campaign.
Despite qualifying for the last 16 of the UEFA Champions League as group winners ahead of Arsenal FC, the Royal Blues' league form, which has seen them drop out of the top six for the winter break, ultimately cost Stevens his job.
The club's decision brings to an end Stevens' second spell at the helm. He previously led them to victory in the UEFA Cup in 1997, as well as two DFB Cup triumphs. He returned to take charge in September 2011, leading them to a third-place finish last term.
Jens Keller, formerly coach of the club's Under-17s, has been installed as Stevens' successor until the end of the season and has already begun first-team preparations for Tuesday's DFB Cup tie with 1. FSV Mainz 05.