The Lilywhites have managed to win just three of their 16 league games this term, with a poor showing in Saturday's 3-0 reverse at Hull sealing Simpson's fate
"It is with heavy heart that this type of decision is made, but the board and I felt that a change was neccesary to try and halt the slide in results and performances," said chairman Derek Shaw.
"Modern football is a cuthtroat industry, and without an awat win in the league this season we felt we had to act now.
"May I place on record my thanks to Paul for his honest and hard-working approach at the club, and wish him every success in the future."
Simpson had been in charge at Deepdale since June 2006, when he quit hometown club Carlisle to take over.
They missed out on the play-offs last season by a single point, but suffered this season after failing to replace striker David Nugent - who was sold to Portsmouth for £6million in the summer.