Solari only took over from Julen Lopetegui in October of last year and has performed poorly as manager with Madrid exiting both the Copa del Rey and UEFA Champions League.
Madrid's loss to Ajax Amsterdam in the last 16 of the Champions League was the last straw with the club's board members as they announced his dismissal on Monday.
"The Board of Directors of Real Madrid, meeting today, Monday, March 11, 2019, has decided to terminate the contract that linked Santiago Solari with the club as coach of the first team and, at the same time, Real Madrid has offered to continue belonging to the club," the club said in a statement on its website, as translated from Spanish into English.
"Real Madrid appreciates the work done by Santiago Solari and the commitment and loyalty he has always shown to this house.
"The Board of Directors has also agreed the appointment of Zinedine Zidane as the new coach of Real Madrid with immediate incorporation for the remainder of the season and the next three, until June 30, 2022."
Zidane returns to the club 10 months after resigning following a trophy-laden first spell that saw him lift nine trophies, including three successive UCL titles.
His first match in charge will see him prepare his side for a La Liga match against Celta Vigo this coming Saturday.