Former Brentford and Tottenham boss Thomas Frank is in advanced talks to take over.
Sunday’s 3-1 defeat by Liverpool was Palace’s fourth in succession in the Premier League.
The Eagles have won just two of their opening 10 games and also have the worst defensive record in the league, conceding 24 goals.
Palace are also 21st in the 36-team Europa League table, with one win from their four matches.
In a statement, the club said that three members of Sage’s coaching staff – Jamal Alioui, Damien Della Santa and Sandy Guichard – had also left the club.
Palace added: “The club thanks Pierre and his staff for their efforts during their time in South London, and wish them well for the future.
“An update on the process of appointing a new manager will be provided in due course.”
Carrick and Sage sacked in first Premier League dismissals of season – reaction
The 47-year-old Frenchman was appointed on a three-year contract in June after Oliver Glasner departed at the end of last season.
He previously led Lens to a second-place finish in Ligue 1 and a first French Cup triumph in their 120-year history.
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