Under Bielsa, Leeds finished ninth last season on their return to the Premier League after a 16-year absence. But Saturday's 4-0 defeat by Tottenham meant they had lost their past four games by an aggregate score of 17-2.
"This has been the toughest decision I have had to make during my tenure at Leeds United, taking into account all the success Marcelo has had at the club," said Leeds United chairman Andrea Radrizzani.
"With Marcelo as our head coach, we had three incredible campaigns and the good times returned to Elland Road. He changed the culture of the club and brought a winning mentality to us all."
Leeds had finished mid-table in the Championship in six of the previous seven seasons before Bielsa's arrival.
"I have to act in the best interest of the club and I believe a change is required now in order to secure our Premier League status. Recent results and performances have not met our expectations.
"We find ourselves in a precarious league position and I feel now is the right time to bring in a new head coach, in order to have an impact in the decisive stage of the season."
Leeds midfielder Kalvin Phillips, who became an England international under Bielsa's guidance, thanked the former Argentina, Chile and Athletic Bilbao coach for transforming his career.
"You saw in me what I didn't even see in myself," said Phillips.
Many other Leeds players expressed their gratitude to Bielsa on social media, with striker Patrick Bamford - who also made his England debut last season - saying Bielsa "changed everything for everyone".