Staunton, who took over from Brian Kerr in January 2006, had been under pressure because of poor performances in the Euro 2008 qualifying campaign.
The nation's bid to reach the finals ended when his team could only manage a 1-1 draw with Cyprus on 17 October.
Under-21 boss Don Givens will take temporary charge of the senior side.
Their final Euro 2008 qualifier is against Wales in Cardiff on 17 November.
Assistant Kevin MacDonald and goalkeeping coach Alan Kelly have also been axed but Sir Bobby Robson will stay on as International Football Consultant.
Former Leeds and Aston Villa boss David O'Leary is the favourite to take over as Republic boss on a permanent basis, while another former player, Liam Brady, has also expressed an interest in the job.
FAI President David Blood thanked Staunton and his management team for their efforts since taking over almost two years ago.
"They have brought through many young players and leave behind a squad with strong development potential," said Blood in a statement.
But he admitted he was not happy with the lack of success under Staunton's leadership.
| | The board will select people, with considerable football experience in the professional game, to appoint the new manager FAI president David Blood |
"As a member of the three-man committee that made the recommendation to appoint Stephen and his team, I am disappointed that things have not worked out the way I, Stephen or my colleagues on the board expected," added Blood.
"The board will select people, with considerable football experience in the professional game, to appoint the new manager."
Football Association of Ireland chief executive John Delaney said appointing outside advisers to head-hunt the successor to Staunton was "the way forward".
When it was put to Delaney that it was recognition that the decision on who to appoint should be made by football professionals rather than FAI administrators, he said: "That's a fair point, yes."
Staunton vowed to stay in the job after the Republic were booed off the Croke Park pitch after the game against Cyprus.
However, FAI chief Delaney refused to publicly back him in the wake of another disappointing display and Staunton eventually left his post following a lengthy meeting in Dublin on Tuesday night.
Staunton was something of a shock choice for the post, given his limited managerial and coaching experience.
It was hoped that Robson's wealth of experience would compliment Staunton's enthusiasm and stature as the Republic's most capped player.
But a 4-0 friendly defeat by Holland last August set the tone for things to come.
A month later, Staunton was ordered from the touchline during the qualifier against Germany, while a humiliating 5-2 away defeat to Cyprus soon followed.
The Republic could only beat minnows San Marino with a last-minute goal in February as their Euro 2008 qualifying campaign completely fell apart.
The Republic are now ranked 32nd in the world, compared to 15th only a few years ago.
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