Cricket Australia has yet to confirm the news but are expected to announce the move later today in a press conference in Bristol.
A statement on their official website said: "CA will hold a media conference in Bristol (UK) tonight to discuss the coaching structure of the Australian team."
Former Aussie batsman Darren Lehmann is the favourite to replace the 45-year-old at the helm of the Baggy Greens for the upcoming Ashes series against England.
Australia had won 10 of the 19 Tests under Arthur since his appointment in November 2011, but have endured a poor recent run of results including a 4-0 defeat to India.
The Aussies also crashed out of ICC Champions Trophy without winning a single game.
Off-the-field incidents have also plagued the team, including David Warner's involvement in a nightclub fracas with England's Joe Root, and four players - including then vice-captain Shane Watson - were also dropped for failing to report performance feedback during their series lost to India.
The Ashes will begin on July 10 at Trent Bridge.