Montella has been rumoured to be leaving Fiorentina for a fellow Serie A club in recent months, with speculation also suggesting he may even take a year off.
But the club have taken swift action for Montella's "ambiguous attitude" of late, issuing a statement on Monday saying they had been forced to "relieve"him of his duties.
"ACF Fiorentina views the recent actions undertaken by head coach Vincenzo Montella as a clear attempt to get out of a contract he signed less than two years ago because it includes a clause that he no longer holds to be in his interest, although he agreed to it at the time," said a club statement.
"It is therefore with great regret that we must recognise that the trust required to continue our relationship together has been lost and, for the good of the club, we have little option other than to relieve Vincenzo Montella of his duties.
"This sudden situation naturally causes organisational problems which we must now resolve as a matter of urgency. "We would have expected to see the coach behave in a clearer, more respectful and less ambiguous manner towards the club and the fans that have given him so much."
Club president Andrea Della Valle hit out last week at Montella, saying the club "is waiting to be informed of exactly where our head coach Vincenzo Montella stands".
Montella led La Viola to the Europa League last four before their exit to eventual winners Sevilla, and steered Fiorentina into next year's competition thanks to a fourth-place finish in Serie A.
A former forward for Roma, he has been linked with a move to AC Milan among other top Italian clubs.
He responded to Della Valle's comments last week by saying that "clarity is required, with or without me".
He added: "That said, I am the coach of Fiorentina and I am prepared to go on being the coach with professionalism and enthusiasm."