Coach Andy Dawson has been placed in charge on an interim basis.
Walter had previously managed Holstein Kiel, Stuttgart and Hamburg in the German second division, leaving the latter after being sacked in February this year.
Their preparations for the season were not helped by the losses of key defender Jacob Greaves at Ipswich, the return of winger Jaden Philogene to Aston Villa and the end of loan spells for striker Fabio Carvalho and striker Liam Delap, who had arrived from Liverpool and Manchester. City respectively.
The Tigers failed to win any of their first six games of the campaign in all competitions, but successive wins against Stoke, Cardiff and QPR set them in the right direction.
That run of form came to an end with a 4-0 defeat at Norwich and they failed to win any of their next eight games.
In the midst of what turned out to be his last matches, Walter received criticism from fans after supporting the club’s decision to use music after goals scored in home games and then questioned the support in the home draw against bottom team Portsmouth.
Owner Ilicali had said he felt the relationship between fans and Walter was “repairable” before Tuesday’s game against the Owls but, with a trip to high-flying Middlesbrough on Saturday, he has now taken action.
Hull City are the fifth Championship team to change managers this season after Preston, Stoke, Cardiff and Coventry.
