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."
Gattuso, 35, a notoriously hard-tackling midfielder, joined Sion at the start of the season after 13 seasons with AC Milan, where he won the Champions League on two occasions.
He also played in Italy's World Cup winning team in 2006.
Last season, Sion were involved in a complex legal battle with UEFA after they were excluded from the Europa League for fielding ineligible players.
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.
However, Sion escaped relegation after Neuchatel Xamax were expelled from the Swiss league over financial irregularities, and officially finished bottom of the table.
Gattuso becomes the 29th coach at Sion since Constantin took over for his second stint in 2002.
An architect, former goalkeeper and participant in the annual Glacier Patrol ski mountaineering race, Constantin has appointed himself as coach on two occasions.
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