Sporting Director Simon Wilson thanks the Dane for leading the first team during an "unusual" period for the club.
Ultimately, however, there was a lack of progress following the relegation from the Championship.
"We knew that the start of this season would be difficult due to the extensive changes at the club, but our expectation throughout was that we would develop as the season progressed—establishing a recognizable style of play and greater consistency in our performances."
"Although we have picked up points, we haven't seen sufficient progress in those areas. We believe that a change in management now offers us the best opportunity to establish a foundation and build toward the second half of the season and beyond," says Wilson.
Pedersen was promoted to head coach in the summer of 2025 and led Sheffield Wednesday through a period marked by significant financial difficulties, points deductions, and transfer embargoes.
This summer, the club was sold to an American consortium, and the team currently sit in eighth place in League One after 11 rounds of the new season.