Reports in the UAE had long been suggesting that the 51-year-old could be axed by the club after a disappointing first season in charge at the Zabeel Stadium.
The Emirati club's new board of directors refuted such stories only last month, but Maradona has now been informed that his contract has been terminated one year before it was due to expire.
A club spokesman told Sport 360: "Following a meeting by the Board of Directors of Al Wasl Football Company on Tuesday evening to evaluate the technical staff of the Al Wasl football team under the leadership of Diego Maradona and after thorough evaluation of the coach and his staff it, has been decided to terminate the services of Diego Maradona and his technical staff."
Al Wasl finished in eighth position in the league, while they lost the Gulf Clubs Championship final on penalties and crashed out of the President's and Emirates Cups, both at the quarter-final stage.
Maradona returned to management in 2008 to guide the Argentine national team, before being sacked two years later following the Albiceleste's last-eight exit at the World Cup in South Africa.