"The Croatian Football Association's (HNS) executive board reached a unanimous decision to terminate our contract with Niko Kovac and his entire staff," the body's president Davor Suker told a news conference on Wednesday.
"We will interview his potential successors in the next 10 days or so and come up with a candidate at the next HNS executive board meeting on Sept 21."
Suker declined to name any of the candidates but Croatian media have widely touted Lokomotiva Zagreb coach Ante Cacic as Kovac's most likely replacement.
Kovac, who steered Croatia to the 2014 World Cup after taking over from Igor Stimac in October 2013, came under fire from the media and his peers.
He also fell out with captain Luka Modric, who was unhappy after being substituted against the Azeris on Thursday and then rubbished Kovac's remarks that the players were not fully committed in Sunday's debacle in Norway.
The Croatians are third in Group H with a provisional tally of 15 points from eight matches, three adrift of leaders Italy and one behind Norway.
Governing body UEFA had deducted a point from Croatia's tally for a racist incident in June's 1-1 home draw with Italy, when the Balkan country's fans carved out a swastika on the pitch with a chemical agent.
Croatia appealed the verdict but if UEFA uphold it at a hearing later this month, they will be reduced to 14 points ahead of their last two qualifiers at home to Bulgaria and away to Malta in October.
The top two from each of the nine groups and the best third-placed team qualify automatically along with hosts France, while the other eight third-placed teams enter a two-legged playoff for the remaining four berths.
(Writing by Zoran Milosavljevic in Belgrade, editing by Pritha Sarkar)
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