Stevens and his assistant Markus Gisdol were released from all duties with immediate effects following a mutual agreement at a meeting this morning, Xinhua reported Sunday.
The "Royal Blues" started with strong performances into the campaign but owing to their recent poor performances the club dropped from the second to the seventh place.
"The Bundesliga is our bread and butter. After a very good start to the season, the best in 40 years, a creeping process unfortunately took hold in the Bundesliga. After the recent negative run of results the club had to take action. It wasn't easy for us," Schalke manager Horst Heldt said in an official statement.
Successor of Stevens, for now, will be Schalke's Under-17 coach Jens Keller who was already in charge of the trainings session this morning.
"He was immediately prepared to take the job on. I know Jens from my time at Stuttgart and I am convinced he's an outstanding coach," Heldt said.
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It was Stevens' second time at Schalke, he had coached the "Royal Blues" from 1996 to 2002 and won the UEFA Cup in 1997, the DFB Pokal (German Cup) in 2001 and 2002.
After nine years of absence the Dutchmen returned to help Schalke as coach Ralf Rangnick had to step back due to health problems.
Schalke sit currently on seventh position with 25 points, five points adrift the top three.
They host Mainz Tuesday at the last 16 of the German Cup to start into the winter break.