Walmsley previously served as the Mariners' youth team coach, winning the National Youth League title in 2011-12.
After leaving to work at Sheffield United's academy in 2012, he returned to the Mariners as technical director last month.
His first match in charge will be at home to Melbourne City on Sunday.
Despite the team's mixed results this season, the departure of the head coach will come as a shock to many.
According to a club statement, the decision is a consequence of executive vice chairman Peter Storrie's extensive restructure, with the club 'in negotiations with Moss in regards to his position', effectively confirming a severance package is being discussed with the axed coach.
The statement went on to claim the club 'is sure that his career in football will continue elsewhere'.
After serving as assistant to Graham Arnold, Moss replaced the title-winner upon his departure for Vegalta Sendai in November 2013.
Moss guided the Mariners to third in the A-League last season and a semi-final exit at the hands of Western Sydney Wanderers.
However, the Gosford-based club are eighth with eight rounds of the 2014-15 campaign remaining, eight points off a finals berth.
They failed to qualify for the 2015 AFC Champions League group stage, having lost 3-1 at home to Guangzhou R&F last month.
The Mariners also confirmed long-serving captain John Hutchinson, due to retire at the end of the season, will take on a player-coach role as a member of the backroom staff until the end of the season, with the stalwart midfielder earmarked for a permanent coaching role.
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