The decision was made by the board after the Scottish Premiership outfit recorded four straight league defeats since the start of February.
In that time the Well conceded 17 goals, including seven against Aberdeen and five in last weekend's clash at home to Dundee.
A statement on Motherwell's official website read: "The decision, taken by the Board following consultation with the 'Well Society, comes after a disappointing run of results, culminating in Saturday's loss at home to Dundee.
"The club wishes to thank Mark for his work during his second spell at Fir Park, particularly getting the club into the top-six during the 2015-16 season and wish him every success in the future."
McGhee spent three-and-a-half years in charge of Motherwell across two spells, the first of which ran from 2007 to 2009.