The former Netherlands midfielder, who had two spells at the Philips Stadion as a player, was named head coach at PSV in June 2018, replacing Phillip Cocu.
PSV finished second in Van Bommel's maiden campaign in charge but have struggled in the Dutch top flight this term and a 3-1 loss at Feyenoord on Sunday proved the final straw.
"The decline is too large and unworthy of PSV," general manager Toon Gerbrands told the club's official website.
"The competitions are the measuring [sticks], but the process around them is also decisive. We monitor this intensively.
"PSV is a club where we try to help and support each other. That has also been the case in recent months.
"The club's interest has always been paramount. The evaluation ultimately resulted in this painful decision. We have all done everything to turn the tide. Unfortunately, we did not succeed."
Van Bommel had previously worked as an assistant under Bert van Marwijk with Saudi Arabia and Australia.