The U's are winless so far this season and have picked up only four points from their opening eight league games, with Saturday's 1-0 loss at fellow strugglers Scunthorpe proving the final straw.
Ward has been at the helm at the Weston Homes Community stadium since May 2010 and has delivered back-to-back top-10 finishes in the third tier. Joe Dunne has been appointed as caretaker manager ahead of this weekend's clash at home to Hartlepool.
Chairman Robbie Cowling said in a statement: "In so many areas, John Ward will leave Colchester United in a better position than when he first took over as first-team manager.
"So much of Colchester United is better than it has ever been, but sadly that is not being reflected in first-team results and the board has decided that this action is required to stop the negativity of the on-field results impacting on the other areas of the club that have also been drastically improved.
"I would like to thank John Ward for his time in charge. He has done more for Colchester United than many people realise, and the board of Colchester United and especially myself would like to wish him all of the very best for the future."
Joe Dunne, who was assistant to Ward, takes the reins for the short term at least having held a number of coaching roles with Colchester since ending his playing career with the club.