Sitting three points above the Premier League drop zone, Watford announced the shock change ahead of games against Manchester City and Arsenal, naming Hayden Mullins as interim boss.
Pearson took charge in December, when Watford sat bottom of the table with eight points from 15 games, but his deal only ran until the end of the campaign.
Despite guiding the team out of the bottom three, the former Leicester City boss will not lead it into the critical closing seven days of the campaign.
Watford's turnover of coaches is unusual for a Premier League club. Javi Gracia began the season in charge of the Hornets, before being replaced by Quique Sanchez Flores, whose second stint at Watford was over inside three months.
Pearson appeared to be the saviour of its faltering 2019-2020 effort as Watford's results picked up, but a 3-1 defeat at West Ham proved to be his final game in charge.
Losing to the Hammers led Pearson to reflect he and his team had "let an opportunity pass us by".
That setback came after valuable back-to-back wins over Norwich City and Newcastle United.
Watford will be visited by second-placed City on Wednesday (AEST), before the Hornets travel to FA Cup finalist Arsenal on Monday (AEST), with former West Ham and Crystal Palace midfielder Mullins at the helm.
A statement from the Vicarage Road club said: "Watford FC confirms that Nigel Pearson has left the club with immediate effect.
"Hayden Mullins, with Graham Stack as his assistant, will take up the position of interim head coach for the Hornets’ final two Premier League fixtures of the 2019/20 season."