The 39-year-old took charge at Dens Park back in October 2010 as a replacement for Gordon Chisholm, who was made redundant as the club entered into administration.
Under Smith's guidance, Dundee were promoted to the Scottish Premier League last season. However, this year they have struggled to string positive results together and are currently bottom of the table, 15 points from safety.
"Dundee FC today announced that they have parted company with manager Barry Smith with immediate effect. Until matters regarding this have been formally concluded, no further statement will be made," read a message on the club's official website.
Smith made over 400 appearances for Dundee during his playing career.