Grammozis originally arrived in March last year as the successor to Christian Gross, but he was unable to keep Schalke in the Bundesliga with an 18th-placed finish.
FC Schalke 04 have relieved Dimitrios Grammozis of his duties with immediate effect. His assistant Sven Piepenbrock and goalkeeping coach Wil Coort have also departed the club.— FC Schalke 04 (@s04_en) March 6, 2022
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The former Darmstadt coach was tasked with ensuring a swift return to the top flight this season, yet the seven-time German champions slipped six points off the automatic promotion places with Sunday's (AEDT) 4-3 defeat at home to Hansa Rostock.
Nils Froling's 95th-minute winner for Hansa also left Schalke four points behind Werder Bremen, who occupy the play-off place in third and have a game in hand.
Simon Terodde had equalised three times in scoring a hat-trick but could not rescue Schalke from a fourth home league defeat of the season – their most in a single 2. Bundesliga campaign.
"We have come to a point in the season where big decisions need to be made," sporting director Rouven Schroder noted in a statement on Grammozis' dismissal.
"We no longer believed that we would have a high chance of achieving our goal of returning to the Bundesliga with the current set-up.
"We therefore decided that the team needed a fresh impulse for the end of the season."
Grammozis was the fifth different coach to lead Schalke since Domenico Tedesco's departure in 2019.