Foley has been in charge for four years but his team has mustered up only two wins from 12 matches in the 2016 season, which resumes next month after the international break.
Assistant coach Dave Wessels will take charge for the last three matches of the season on a caretaker basis with a new coach to be installed for next season.
"Michael is a fine coach and has done a good job in his four years with the team considering some of the obvious challenges he’s faced," Rugby Western Australia chief Mark Sinderberry said in a news release.
"We would have liked to have had more success during this time but the Western Force also had its most successful season under Michael in 2014.
"With the team out of contention for finals, it was appropriate timing for both parties to look to the future and that's why we have agreed to part ways.
"We wish Michael all the best for the future and will commence a process together with the ARU to appoint a new head coach for the 2017 season."
Foley, a former Wallabies hooker who also coached the New South Wales Waratahs in 2011-12, led the Force to nine victories and the brink of the playoffs for the first time two years ago.
They slumped to the bottom of the table with three wins last year, however, and, despite some encouraging pre-season results, their inability to score tries again cost them dearly this year.
(Reporting by Nick Mulvenney, editing by Ian Ransom)
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