Davies' second spell in charge of the Reds came to an end after a dismal run of form and a breakdown in his relationship with the club's owner and chairman, Fawaz Al Hasawi
The heavy loss at the iPro Stadium saw Forest's run without a win reach eight matches - a streak which has seen the Reds go out of the FA Cup to League One side Sheffield United and drop out of the Championship play-off places
A statement on Forest's official website said: ''Nottingham Forest Football Club have confirmed the termination of manager Billy Davies' employment.
"The club thank Mr Davies for his efforts during his second spell as manager since his re-appointment in February 2013 and wish him well for the future.
"Nottingham Forest will make a further announcement in due course."
Reports on Monday morning named Neil Warnock as the frontrunner to replace Davies on a short-term deal until the end of the season.
The 65-year-old, who has been out of management since leaving Leeds in April 2013, would reportedly bring in Keith Curle and Ronnie Jepson as his assistants
Davies, who on his return to the club in February 2013 was handed a contract until the summer of 2017, steered Forest to the Championship play-offs twice during his first spell in charge, before his relationship with then-owner Nigel Doughty broke down and led to his departure.
Source : PA