In its first season out of the top flight since 2001, Bolton has won just three of its 10 matches to lie in 18th place in the 24-team League Championship.
"Owen poured his heart and soul into the job, both on and off the pitch, and he led our club with great dignity during some very challenging times," Bolton chairman Phil Gartside said. "It is the right time for a change. We set a target at the beginning of the season and want to get back on track."
Coyle was praised for the way he supported Fabrice Muamba's recovery after the midfielder suffered an on-field cardiac arrest during an FA Cup match at Tottenham in March.
That enhanced the already-strong reputation Coyle had established after an impressive spell in charge of Burnley, which he left to join Bolton in January 2010 having guided the team into the Premier League. With both teams, he stressed the importance of playing attractive, passing football.
The emotional strain of tending to Muamba appeared to take its toll on Coyle by the end of last season, however, and his team has struggled this campaign.
"I have always been driven to act in the best interests of the club and care passionately about it," Coyle said. "I had fantastic times here as a player and it has been a privilege to have held the post of manager."
Two members of Bolton's academy staff, Jimmy Phillips and Sammy Lee, will take temporary charge of the first team while the club searches for a new manager.