The former Real Mallorca, Zaragoza, Panathinaikos and Terek Grozny coach was sent packing after fourth-placed Sion were thrashed 4-0 by FC Thun in the Swiss Super League on Sunday.
Eccentric club president Christian Constantin was seen talking on his mobile phone during the second half and Swiss media speculated that had already decided to sack Munoz before the final whistle.
"Following Sion's disastrous performance against FC Thun and in the face of the lack of effort showing in the team, the club's board have decided to make the players face their responsibilities," said Sion in a statement.
"To do this, from now until further notice, they will take charge of their own affairs. The club entrusts the responsibility for the group to its captain Gennaro Gattuso."
He also played in Italy's World Cup winning team in 2006.
The club lost the case and were docked 36 points for breaking the statutes of European football's governing body which bans clubs from taking cases to the civil courts.
