Allardyce "shocked" by Newcastle decision
The club, currently 11th in the Premier League, said the decision had been reached "by mutual agreement".
Allardyce, who was in charge for 24 games, said: "I'm disappointed but I wish them all the best for the future. It was a shock, I didn't expect it."
Former captain Alan Shearer has ruled himself out of the running and chairman Chris Mort said: "A new manager has not yet been appointed."
First-team coach Nigel Pearson will take charge of the team for Saturday's Premier League meeting with Manchester United.
Earlier on Wednesday, Allardyce had attended a news conference ahead of that game but gave no hint that his time at the club might be coming to an end.
Indeed, the 53-year-old had spoken at length about his plans for the January transfer window.
However, shortly afterwards, Newcastle announced news of his departure with a statement on their official website.