Jose Couceiro, who joined the club as managing director in December, will take over as coach for the rest of the season, Sporting said. Couceiro previously managed Porto for half a season in 2005 and has also coached in Lithuania and Turkey.
"It was a tough period, but we gave our best for Sporting," Sergio told a news conference. "I want to make it clear that I am not bitter, just saddened."
Sergio took charge last July after guiding Guimaraes to a fifth-place finish, but his time at Sporting has been complicated, with poor displays on the pitch compounded by problems at board level.
Monday's 2-0 home defeat to Benfica left Sporting trailing their Lisbon rivals by 15 points in the Portuguese Premier League and 23 points behind undefeated leaders Porto.
They were eliminated from the Europa League round of last 32 in dramatic fashion on Thursday, with a last-gasp goal by Edu putting Scotland's Rangers through with a 3-3 aggregate score.
Sporting president Jose Eduardo Bettencourt resigned after a home defeat in January, with the club due to elect a new president next month.
Former Portugal international Costinha was sacked as director of football this month after a controversial interview in which he criticised the board for not providing funds to buy new players and for selling striker Liedson to Brazil's Corinthians.
Everton’s joint second-highest Premier League scorer this season has never played for Everton
‘Scoring in a World Cup is like winning the title – can you imagine millions of people celebrating something you did? It’s insane and made me very proud’: Brazil legend explains how much 2002 goal meant to him
