Galaxy has endured a dismal campaign, winning only five of its 19 matches and enduring a six-game losing run across September and October – its worst such streak in 13 years.
A 5-2 defeat to Portland Timbers, fresh off the back of losing El Trafico to Los Angeles FC, proved the final straw for Schelotto.
"Based on results, we have decided to go in a different direction," general manager Dennis te Kloese said. "The LA Galaxy is a club that is built on winning on the field and being representative of the championship mentality and pedigree that you expect in Los Angeles."
Schelotto was appointed Galaxy coach in January 2019, having won two titles with Boca Juniors and guided it to a Copa Libertadores final it infamously lost to bitter rival River Plate in Madrid.
Galaxy lost to rival LAFC in the play-offs in his first year and then saw Zlatan Ibrahimovic depart, with replacement Javier Hernandez scoring just once in MLS to date.
LA – which have been linked with former star striker Robbie Keane – is in last place in the West despite the announcement on Friday the league will switch to a points-per-game system for the 2020 season.
It is the latest development in a campaign that has been hindered by the coronavirus pandemic.
Group games at the hastily arranged MLS is Back Tournament counted towards the regular season, although the Supporters' Shield title was briefly taken off the table for the year due to imbalanced schedules before that decision was reversed.
A points-per-game system benefits those teams who have not been able to play as often due to COVID-19 cases – most notably Colorado Rapids, who have played six games fewer than their rivals but are now boosted into a playoff place.