He was appointed in April and steered Augsburg to safety as it finished 15th.
However, Augsburg is just five points above the relegation play-off place amid a run of five games without a win, four of them defeats.
The weekend loss to Bayern Munich proved the final straw, with the Swiss and assistant Stefan Sartori seeing their time at the club come to an end.
"This decision was not an easy one for us, but based on a record of just four points from nine matches, we decided to make a change in the coaching position," sporting director Stefan Reuter said.
"There will always be difficult phases that have to be overcome. In the current situation, however, we see our goal of staying in the league as endangered, so we came to this decision."
Schmidt, "I accept the decision of the club management and thank them for the trust and the opportunity that I received here," said Schmidt.
"The club is bigger than everyone. I therefore wish Augsburg and the team all the best and hope that the turnaround will succeed."