Redknapp arrived at St Andrews with just three games left of last season, but managed to save them from the drop with two wins and he agreed a one-year deal to take charge this season.
After guiding the team to survival last season, the former Tottenham manager brought 14 players into the club in the Transfer Window, but has not seen results improve.
Former Blues midfielder Lee Carsley has been placed in temporary charge.
But despite investing heavily in new players over the last few months, Birmingham have made a decision to axe the 70-year-old after six successive defeats, which sees them sitting second from bottom of the Championship.
Is this the end of Redknapp's long managerial career?
We thank him for all his efforts and wish him good luck for the future.
"We have got to lift ourselves. There is a team waiting to gel but we have suffered several injuries to key players", Redknapp told the BBC after the Preston loss but prior to the announcement of his departure.
He said: "I thought we played well first half, I only asked them to do exactly the same in the second half as what we did first".
Carsley, 43, who was previously head coach at Brentford on an interim basis in 2015, steps up from the role of development squad manager at Birmingham.