Southampton's owners moved quickly after the Saints' latest loss in the league, a 5-0 home humbling by an out-of-form Tottenham on Sunday night.
All five goals were scored in the first half of the game.
The players were subsequently booed off at full-time, with one section of the home fans unfurling a banner that read 'get out of our club' during the second half.
The result leaves Southampton with just one win and only five points after their first 16 games.
In a statement, the club's board described the decision to terminate Martin's contract as "difficult":
"Going into the start of the season, we all knew the challenges that we would face this year as we readjusted to life in the top flight, competing in the best and most competitive league in the world.
"However, the reality of our situation is clear. The board have supported Russell and his staff and been open and transparent regarding our expectations.
"We have all been on the same page in recognising the urgency of needing results to improve.
"We would like to take this opportunity to thank Russell and his staff for all the hard work and dedication they have given the club on and off the pitch over the last 18 months.
"Everyone connected with Southampton FC will always have fantastic memories of last season, especially the Play-Off Final win in May.
"Current Under-21s Manager Simon Rusk will take charge of the team on an interim basis until we announce a permanent replacement."
Martin was understandably dejected after Sunday night's big defeat to Spurs but had vowed to continue fighting for his job.
"I was hurt in the first half," Martin told TNT Sports after the match. "We did not respond very well to the setbacks as a group.
"We have seen that all too often this season. After the first goal, our response was very poor."
Speaking about his future, the former Scotland international said: "We have no choice but to keep working and fighting.
"It's what I have been doing in this job and I will continue doing it until I am told not to."