"The Russian Football Union and the head coach of the national team, Fabio Capello, have mutually agreed to terminate his employment contract," the union said in a statement.
"The RFU sincerely thanks Capello for his work as the country's national team head coach and wishes him success in his future professional activity."
Capello -- who is reported to be the highest-paid coach in international football -- took over the Russian team in 2012 and took them to the 2014 World Cup before being given a lucrative new contract to stay in the job through to the end of the 2018 World Cup, which Russia will host.
A source told Russian news wire R-Sport that the 69-year-old coach will receive around 930 million roubles in compensation.
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"That's the way of the football world," ITAR-TASS news agency quoted Capello's assistant Oreste Cinquini as saying in comments translated into Russian.
"But we don't have any hard feelings towards the RFU."
-- Poor results --
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Capello has come under increasing pressure following a dismal run of results and the team's lacklustre performances in Russia's Euro 2016 qualifying campaign.
Russia have just two wins to their name from six matches in qualifying Group G -- a 4-0 home victory over Liechtenstein last September before being awarded a 3-0 victory from the abandoned clash against Montenegro in Podgorica in March.