The former Liverpool assistant took over at the Midlands side just before Christmas and won his first three games in charge, but has since presided over a run that has seen the Saddlers drop from the automatic promotion spots to fourth in the table.
"I am extremely disappointed for the players, their performances over the past month have not gained the points they deserved," O'Driscoll said in a statement on the club's website.
"This is a different phase of the season, and as we have repeatedly seen, teams have recognised the team's strengths from the first half of the campaign and prepared to counter that when facing us.
"But the players deserve enormous credit for adapting, finding different ways to play and maintaining their performance levels even, at times, in the face of frustration and disappointment.
"They are a close group whose success so far has been built on the trust, understanding and respect among them. I wish them the best for the rest of the season."
In a brief statement, chief executive Stefan Gamble thanked O'Driscoll for his "time, effort and dedication" in his three months with the club.
Walsall are now in search of their fourth manager this season.