The 36-year-old joined VfB in September 2016 and guided the club to promotion into the Bundesliga as second division champions the same season.
However, Wolf has been unable to arrest a slump in form that has seen Stuttgart lose six of their last seven league games and slip to within just three points of the relegation playoff places.
"We had a very intense and emotional discussion with Hannes following yesterday's match (a 2-0 loss to Schalke 04) in which we thoroughly analysed our situation," sporting director Michael Reschke told the official club site.
"This discussion brought us to the conclusion that the danger of us not being able to turn our fortunes around under the current management is too great. We need fresh incentives to get back on the right track."
Stuttgart travel to fellow strugglers Wolfsburg on February 3.