The German, who last September became the first foreigner to coach Bulgaria since 1966, had signed a one-year contract with an option for two more years but led the team to only three wins - two of them in friendlies - in 11 games.
Bulgarian Football Union President Borislav Mihaylov criticised Matthaus for living outside the country for most of the time, adding that it had influenced results and preparation of the team. The BFU said his contract would not be renewed and under-21 coach Mihail Madanski stepped in on a temporary basis.
"It was a different story with Matthaus, it was like a broken phone conversation," said the Sporting Lisbon forward, who has 33 caps.
"You're talking to a translator and you know that sometimes such 'tactics' leads to problems. One didn't hear something, others didn't understand something... much of it was lost in translation."
