The Kuwaiti-based Al-Hasawi family has assumed control of the Championship club and has wasted little time in implementing its plans for the Reds.
Cotterill leaves just nine months into the three-and-a-half-year deal he signed when replacing former England head coach Steve McClaren in October.
A statement on the club's official website, nottinghamforest.co.uk, said: "Nottingham Forest can confirm that manager Steve Cotterill has departed the club with immediate effect.
"Mr Cotterill met with the club's new owners, the Al-Hasawi family, yesterday and after long deliberations they have decided to make a new appointment in a bid to deliver their long-term vision.
"The club would like to acknowledge their gratitude to Mr Cotterill for guiding it through an extremely difficult and traumatic period and for retaining the side's Championship status last season.
"The club will be making no further comment at this time."
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