A 1-1 draw against Finland on Friday saw Croatia slip from top spot to second place in Group I, falling two points behind new leaders Iceland.
With Ukraine favourites to take all three points in Kiev on Monday and Iceland facing Kosovo in Reykjavik in their final games, Croatia's hopes of reaching Russia are in peril.
"Dalic is the new coach and will be in charge for the last game away to Ukraine," Croatian Football Association (HNS) president Davor Suker told a news conference in Zagreb.
"The HNS executive board made a unanimous decision after a long night to terminate cooperation with Cacic. We took only four points in the last four games and had no choice but to take this course of action."
Dalic, 50, has previously served on the Croatia Under-21 coaching staff, and has largely worked in Saudi Arabia and the United Arab Emirates since 2010.