Nuno had 16 months at Al-Ittihad, winning the Saudi Super Cup and Pro League
They have won six of 12 league games this season and suffered a 2-0 defeat by Air Force Club of Iraq in the Asian Champions League on Monday.
Nuno, 49, took over at Al-Ittihad in July 2022 after being sacked by Tottenham eight months earlier.
Assistant coach Hassan Khalifa will take interim charge of the team.
According to Spanish football expert Guillem Balague, former Wolves boss Julen Lopetegui has been approached for the role but the Spaniard is keen to wait for an opportunity in the Premier League.
Lopetegui was replaced by ex-Bournemouth manager Gary O'Neil in August after guiding Wolves to a 13th-place finish last season, but Balague said it would take a big offer from Al-Ittihad to tempt the 57-year-old away from England.
The club are also reportedly interested in ex-France and Paris St-Germain boss Laurent Blanc as well as former Real Madrid manager Zinedine Zidane.
Portuguese manager Nuno enjoyed a successful spell at Wolves from 2017 to 2021 but lasted just four months at Spurs before being replaced by Antonio Conte after losing five of 10 Premier League matches.
The former Porto coach guided Jeddah-based Al-Ittihad to the Saudi title last season, but there were reports of a difficult relationship with former Real Madrid striker Karim Benzema, who joined the club in June this year as part of the influx of stars into the league.
In a statement on X, Al-Ittihad said: "The club has announced the end of its contract with Portuguese coach Nuno Santo.
"This decision comes after a comprehensive technical evaluation of the past phase during which he was in charge of coaching the first football team."
Former Liverpool midfielder Fabinho and ex-Chelsea and Leicester player N'Golo Kante also play for Al-Ittihad, who are sixth in the Saudi Pro League and will next play Abha on Friday.
-- Courtesy of BBC Sport