Former Blues midfielder Lee Carsley has been placed in caretaker charge of the club, who now sit 23rd in the Championship table after their first eight league games, above only promoted Bolton Wanderers.
Saturday's 3-1 home defeat to Preston North End proved the final straw for the club, who announced the decision shortly after full-time.
The Blues said simply on their website in an official club statement: "Unfortunately due to the poor start to the campaign which sees the Club second from bottom of the Championship, we are left with no choice but to terminate the contract of the manager with immediate effect".
There will be no further comment at this time.
Lee Carsley, Blues' head professional development coach, will step in as caretaker manager.
"We have got to lift ourselves".
Redknapp - who embarked on a rebuilding programme at City over the summer, which included the club-record signing of Jota - took over after Gianfranco Zola's disastrous reign last season. "I would love to be the manager to bring some success to Birmingham".
"I didn't tell them to do that, that's for sure, but I take the blame - that's the way the game is".
Carsley has a growing reputation in the game and is believed to be high on the list of candidates for the job, with former Middlesbrough boss Aitor Karanka believed to be keen on the role, as is Redknapp's former assistant Steve Cotterill.