The 49-year-old’s position was always likely to be under threat after a disappointing season ended with defeat to local rivals Dundee on Monday which confirmed they would be playing Championship football next season.
Appointed in October, the former Hibernian, Kilmarnock and Finland boss could not turn things around for the club he represented for five years.
A short statement on the Terrors’ website confirmed his departure, with the club now beginning the process of finding a replacement.
“Dundee United Football Club and Mixu Paatelainen have agreed the departure of Paatelainen as first team head coach with immediate effect,” it read.
“The club thanks Mixu for his service and will now begin the search for a new head coach.”
United have three games remaining, trips to Inverness and Kilmarnocksandwiching their final home fixture against Partick, before their 20-yeartop-flight stay comes to an end.
In the statement released by the club, Paatelainen said, “I would like to thank the players, staff and supporters.
“It has been a difficult winter and the challenge was huge but nevertheless I have enjoyed every day working for the club and with this group of players.”
Paatelainen’s position appeared untenable after chairman Stephen Thompson released a statement to fans on Tuesday which failed to mention the Finn and called for ‘many radical changes’ as well as confirming he was looking for fresh investment for the Tannadice outfit.
“Dundee United have let you, the supporters, down this season,” his statement read.
“I apologise unreservedly to all of you for our relegation from the Ladbrokes Premiership.
“As the chairman the buck stops with me and I accept full responsibility for what has happened. The big decisions were mine and I got some of them wrong.
“I have backed managers with the third biggest budget in the league but the results have not been acceptable. In the near future many radical changes will be made to try to ensure our quick return to the top league.
“I am currently seeking fresh investment in the club which may in time lead to me standing aside, and I aim to strengthen our current financial position to launch a bid for an immediate return to the top flight.
“I understand calls for change and am open to realistic well-funded proposals that can bring in major investment.
“However, with the serious financial challenges we face in the Championship, I will not put the club’s existence in peril by simply handing over the keys unless any proposed investor is well financed and can offer a sustainable alternative.”
Raith Rovers boss Ray McKinnon has already been linked with the position but the Championship club are keen to keep the former United midfielder in charge as they go in search of promotion.
Eric Drysdale, a director at Rovers, told BBC Scotland: “We have not had any contact from Dundee United or any other club regarding Ray McKinnon.
“And should any be forthcoming it would be extremely unwelcome. Ray and the team are fully concentrated on the play-off matches against Hibernian and nothing will distract them from this.”
Dundee United chairman Stephen Thompson blasts players in apology to fans
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