Forest slipped out of the Championship play-off places as a result of Saturday's humbling defeat, which extended their winless run to eight matches.
A statement from Forest on Monday read: "Nottingham Forest Football Club have confirmed the termination of manager Billy Davies' employment.
"The club thank Mr Davies for his efforts during his second spell as manager since his re-appointment in February 2013 and wish him well for the future.
"Nottingham Forest will make a further announcement in due course."
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