The 44-year-old Norwegian was appointed at Molineux during the summer, but he has struggled to adapt to life in English football.
The Championship side were beaten 1-0 by non-league Luton Town in the FA Cup third round on Saturday - a result that left Solbakken with just three wins from 16 matches.
A statement on the club's official website read: "Wolves have announced that Stale Solbakken has left the club with immediate effect.
"The club has also terminated the contracts of Johan Lange, assistant manager and Patrick Weiser, first team coach.
"The club would like to offer their thanks and best wishes to Ståle, Johan and Patrick."
Solbakken leaves with the pre-season favourites for promotion down in 18th place in the Championship after a difficult first half of the season, blighted by injuries and poor home form.