The former Leicester City boss, who signed a three-year contract with Derby in May, has endured a difficult start to the season.
His side have won only two of their 11 league games and lie 20th in the 24-team standings.
The 53-year-old was suspended by Derby last month and local media reported that the decision was taken pending a club investigation into his behaviour.
"Derby County Football Club can today confirm that they have mutually agreed to part company with Nigel Pearson with immediate effect," Derby said on their website (www.dcfc.co.uk).
"As a result of the mutual termination of Nigel Pearson's employment agreement with Derby County any disciplinary process has now ceased."
Pearson was sacked by Leicester at the end of the 2014-15 season due to a breakdown in his relationship with the club's owners after he had guided them to Premier League safety when they had appeared destined for relegation.
During his last season with Leicester, Pearson had an on-field altercation with Crystal Palace's James McArthur, and he courted controversy when he referred to a reporter as an "ostrich". He later apologised for the comments.
(Reporting by Ian Rodricks in Bengaluru, editing by Ed Osmond)
