The 44-year-old's career at Easter Road has come to an end with the club currently sitting seventh in the Premiership table after picking up 15 points from 11 games.
The club announced the news via their official Twitter page quoting Fenlon as saying: "It is a difficult decision for me, but it is the right decision.
"I've been privileged to manage this fantastic football club and I really hopes it does kick on now."
Fenlon's position was called into question by fans this week following Hibernian's defeat to rivals Hearts in the Scottish League Cup quarter-finals.
Jimmy Nicholl will take charge of the first team on Sunday.