The widely anticipated move came after a 45-7 pounding by the Green Bay Packers on Sunday and less than a year after the Cowboys awarded him with a contract extension that was expected to keep him with the team through the 2011 season.
"An in-season coaching change is not something I've done before, something I was reluctant to do as recently as last week," Cowboys owner Jerry Jones told a news conference. "But I think what's best for the organization and the fans is a coaching change."
Phillips, in his fourth season as Dallas coach, will be replaced on an interim basis by offensive co-ordinator Jason Garrett. Defensive line coach Paul Pasqualoni will take over as defensive coordinator, a role that Phillips had been filling.
The season has been especially disappointing since Dallas was a pre-season favorite to reach the playoffs and had hoped to become the first team to play in their home stadium in the Super Bowl.
"I am disappointed in the results of this season to this point, but I am also very proud of what our team and our players accomplished in the previous three years," Phillips said in a statement.
The Cowboys' skid was intensified by the loss of starting quarterback Tony Romo, who suffered a broken collarbone during an October 25 loss to the New York Giants.
Dallas' defense has given up at least 35 points in each of the last three defeats.
(Reporting by Larry Fine in New York, Editing by Frank Pingue)