Oilers president of hockey operations Kevin Lowe announced at a news conference on Monday at Rexall Place that the team has fired their general manager.
Lowe named Craig MacTavish, longtime former player and coach with the Oilers, is back as Tambellini's replacement.
MacTavish, now 53, cited a lack of depth and a deficit in competitiveness as challenges the club has to overcome.
"I'm an impatient guy and I bring that impatience to this situation," he said. "I think we're at the stage in terms of the cycle of our hockey club right now that we have to do some bold things.
"We have to expose ourself to some semblance of risk to try and move the team forward in a rapid fashion."
Scott Howson will assist MacTavish after being named senior vice-president of hockey operations on Monday. Howson is in his second stint with the Edmonton team after serving for nearly six years as general manager of Columbus.
Tambellini was hired by the club in 2008, but the Oilers have failed to make the playoff since then despite a host of changes.
MacTavish, Pat Quinn, Tom Renney and current bench boss Ralph Krueger have all coached the club since their last appearance in the Stanley Cup playoffs in 2006, when they lost in seven games in the final to Carolina.
Edmonton selected first overall in the last three NHL drafts, taking forwards Taylor Hall, Ryan Nugent-Hopkins and Nail Yakupov, and the Oilers also succesfully land college free agent defenceman Justin Schultz last summer, who was coveted by several teams.
Lowe singled out MacTavish for helping secure Schultz.
The Oilers this season looked like they were flirting with the possibility of making the playoffs for the first time since reaching the final under MacTavish in 2006, but they've been outscored 17-4 in their current five-game losing streak.
Edmonton is 16-18-7, in 12th place and over eight points back of the last Western playoff spot.
Both Lowe and MacTavish said despite the recent results, the pieces are in place for rebuilding.
Lowe, influential with respect to Edmonton's strategy for over a dozen years, got testy with a reporter who questioned whether the trio of familiar faces were capable of leading a rebuild given the poor results of recent years.
"How are fans are going to be reassured that the group that left the mess that Tambellini couldn't quite clean up is now going to be cleaned up by the guys who left the mess to begin with?" asked the reporter.
"In terms of the group that messed things up, you're talking about the group that had a team one period away from winning the Stanley Cup?" Lowe shot back.
"Seven years ago," said the reporter.
Lowe pressed on. He said after coming close to the Stanley Cup in 2006 Oilers management decided to try to keep the core group together. When that failed three years ago, they overhauled the roster and started from scratch.
"Are you saying to me you're getting impatient after three years?" challenged Lowe.
"There's one other guy I believe in hockey today that is still working in the game that has won more Stanley Cups than me. So I think I know a little bit about winning."
For his part, MacTavish coached the Oilers for nearly a decade. After leaving the organization when Tambellini took over in 2009, he coached Canada at the world championships the following year, and went on to serve behind the bench for the the Chicago Wolves of the American Hockey League.
He obtained his MBA from Queen's University and was brought back by Edmonton to serve in the front office last summer.
Prior to joining Edmonton, the 53-year-old Tambellini spent years in the front office of the Vancouver Canucks. He's also been involved extensively with Hockey Canada, most notably working as part of the braintrust behind the 2002 gold medal effort for the Canadian men's team at the Salt Lake City Olympics.
He had one year left on his contract with the Oilers.