The 47-year-old Frenchman managed only 16 matches across all competitions, winning five of them before the club decided to end his tenure. Former Brentford and Tottenham manager Thomas Frank is reportedly in advanced discussions with Palace over becoming his successor.
Sage's dismissal comes after Sunday's 3-1 defeat against Liverpool, which marked the Eagles' fourth consecutive loss in the Premier League. Palace have managed just two victories in their opening 10 league matches and currently hold the division's worst defensive record, having conceded 24 goals.
Their struggles have also extended to European competition, where they sit 21st in the 36-team Europa League standings after collecting only one victory from four matches.
In an official statement, Crystal Palace confirmed that three members of Sage's coaching team, Jamal Alioui, Damien Della Santa and Sandy Guichard, had also left the club. The Eagles thanked the departing manager and his staff for their contributions during their time in South London and said further information about the appointment of a new manager would be provided in due course.
Sage becomes the second Premier League manager to lose his job this season, following Manchester United's decision to dismiss Michael Carrick on Thursday.
He joined Palace in June on a three-year contract after Oliver Glasner departed at the end of the previous campaign. Before moving to England, Sage had enjoyed considerable success with Lens, guiding the French side to a second-place finish in Ligue 1 and their first French Cup triumph in 120 years.
However, he struggled to reproduce the achievements of Glasner, who led Palace to their first FA Cup title and a Europa Conference League triumph before moving to Nottingham Forest.
Palace have not won a league match since 11 October, with their poor run beginning with a humiliating 5-0 defeat against rivals Brighton. Injuries and the absence of forwards Jean-Philippe Mateta and Ismaila Sarr also complicated Sage's plans.
Meanwhile, Frank, who was dismissed by Tottenham in February after an eight-match winless league run, could return to management at Selhurst Park.
