Williams departs after 13 months in charge with Swansea 17th in the second tier, eight points clear of the bottom three with 13 fixtures remaining this season.
The Swans were ninth and four points off the play-off places after beating Luton at home on December 29.
Since then under Williams the Swans managed just four points from nine games, including a 3-0 defeat away to bitter rivals Cardiff.
Assistant head coach Ryan Harley and first-team coach analyst George Lawtey have also left their roles.
Fellow assistant head coach Alan Sheehan has been named caretaker boss and will take the reigns for a second time on an interim basis, with Swansea saying the search for a permanent successor to Williams is “already under way”.
Sheehan will work alongside long-standing coach Kristian O’Leary and goalkeeping coach Martyn Margetson for the Swans home fixture against Blackburn Rovers visit on Saturday.
Speaking on the departure, Swansea chairman Andy Coleman said:
“This was a difficult decision and one that has not been taken lightly. Luke has led the club through some challenging periods and we appreciate his hard work.
“I am aware of the effort he and his staff have put in throughout the last 13 months for Swansea City. I want to personally thank Luke, Ryan and George for their dedication and the sacrifices they have made on behalf of the club.
“Unfortunately, since the turn of the year our performances and results have not been of the standard required at this level. Ultimately, that has led us to conclude a change is required in order to bring about an improvement in our showings on the pitch.
“We will keep supporters informed of developments when we are in a position to announce a new head coach, while Alan, his staff and our squad focus on our upcoming fixtures.”
[Lead image: Swansea City FC]
