The club said in a statement on Monday that first team coach John Metgod had also left, with director of youth operations Paul Hart appointed caretaker coach.
Former England captain Adams, 42, had been in charge at Fratton Park for just over three months after taking over when Harry Redknapp joined Tottenham Hotspur.
Portsmouth were well-placed in the top half of the table but have taken only two points from their last nine league matches and are 16th in the standings, one point above the relegation zone.
The south coast club lost 3-2 at home to title challengers Liverpool on Saturday despite leading 2-1 with five minutes remaining.
"This has been a very difficult decision and Tony has worked tirelessly to arrest the slump in form," the club said in a statement.
"He is rightfully highly-respected within the football world and played a major role in our FA Cup triumph last season.
POOR RESULTS
"The owner and board feel they have been as supportive as they can during a period where results have been poor. The team has played well but too many points have been dropped from winning positions.
"The priority for Portsmouth Football Club is to remain in the top flight and we feel the appointment of a new manager will give us the best opportunity to enable us to do this."
Portsmouth won four of their 21 games in all competitions under Adams, drawing six and losing 11.
Adams spent his entire playing career at Arsenal where he was part of a miserly defence comprising Lee Dixon, Steve Bould and Nigel Winterburn. He won 66 caps for England.
After retiring in 2002 Adams became manager of Wycombe Wanderers the following year before resigning a year later.
He broadened his knowledge of the game during a spell as a trainee coach with Dutch side Feyenoord and joined Redknapp's coaching staff at Portsmouth in 2006 as assistant manager.
Adams is the seventh Premier League manager to leave this season after Alan Curbishley, Kevin Keegan and Roy Keane quit West Ham United, Newcastle United and Sunderland respectively, Redknapp left Portsmouth to replace the sacked Juande Ramos at Spurs and Paul Ince was sacked by Blackburn Rovers in December.)
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