Assistant coach Voro will take charge of the first team on an interim basis until the end of the 2019-2020 LaLiga season. It will be his sixth spell at the helm.
Valencia has won just one of its five games since the league returned from its coronavirus-enforced stoppage, and they have been victorious twice in their past 13 outings in all competitions.
Celades, who took over from Marcelino in September, leaves the club eighth in LaLiga, eight points adrift of the Champions League places.
A Valencia statement read: "Valencia have communicated to Albert Celades his removal from his position as first-team coach, with immediate effect.
"The club wish to thank him publicly for his work and dedication during his time at the club - a period in which we achieved qualification for the knockout stages of the Champions League and important victories at grounds where we had previously not won.
"The club also value his help and contribution since he took over as coach of the first team in a moment of difficulty, and wish him every success in his future endeavours."
Valencia faces Athletic Bilbao in a LaLiga game at Mestalla in its next outing.