"Given recent events, the FPF directors decided unanimously to settle (end) Carlos Queiroz's contract with immediate effect," Portuguese Football Federation president Gilberto Madail told a packed news conference.
"This decision has been communicated to Carlos Queiroz, who will receive the reasons for the decision first hand," he added.
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The federation had given the coach, who had two years left on his contract, a one-month ban in late August but Portugal's anti-doping authority later extended that to six months.
Portugal have made a poor start to their Euro 2012 qualifying campaign with Queiroz consigned to the stands.
They are second from bottom of Group H with one point from their first two qualifiers having lost 1-0 in Norway on Tuesday following a 4-4 draw at home to Cyprus on Friday.
"I already sensed it was the inevitable path... We are not satisfied with the fact that Queiroz's rights are not being respected," the coach's lawyer Rui Patricio told reporters.
"If the contract has been terminated without just cause, there has to be compensation. If there has been interference from the government then international organisations, and I mean FIFA of course, will be alerted," he added.
HARSH WORDS
The basis of Queiroz's defence has been that he did not obstruct any anti-doping activity although he has admitted exchanging harsh words with the agents during their surprise visit to Portugal's training camp in May.
The coach said he was simply expressing his annoyance at having his players' rest disturbed and had vowed to appeal the ban at the Court of Arbitration for Sport.
Last month, Queiroz called Sir Alex Ferguson, under whom he worked as an assistant manager at Manchester United for six years, former Portugal winger Luis Figo and the club presidents of Porto and Benfica as character witnesses.
Madail said the FPF will begin searching for a replacement to take charge of the team before next month's Euro 2012 qualifiers at home to Denmark and away to Iceland.
Local media expect a Portuguese to be hired, with former Sporting coach Paulo Bento set to be approached as he is not currently coaching at club level and could start immediately.
Madail added that the FPF will hold new elections for the federation board which he he heads.
Portugal's struggles in their Euro 2012 qualifiers have occurred with winger Cristiano Ronaldo missing with an ankle injury and the banned Queiroz looking on from the stands.
Agostinho Oliveira, who took charge as interim coach, said the controversy surrounding Queiroz was not
