The defeat came at the end of a transfer window which left the club’s fans disappointed at a lack of incoming players and the sale of their captain, Johnny Howson.
Grayson took control at Elland Road in December 2008 and managed the club to promotion from League One the following season.
His side narrowly missed out on the play-offs in their first season back in the Championship but have struggled to make an impression in the division’s top six this term.
Leeds United’s chief executive Shaun Harvey told the club’s official website: “We have 18 games to go this season and are still within touching distance of the play-offs.
“We felt with the transfer window closed we needed to make the change at this time in the belief that a new managerial team will be able to get more out of the existing squad of players and make the difference.”
Youth team boss Neil Redfearn will take temporary charge.