The Spanish coach lasted less than three months in office.
The club announced the decision this Sunday, the day after a 2-1 loss to Southampton.
Watford could not sustain the advantage he had achieved during the first half at St. Mary's and remains at the bottom of the table with eight points in 14 games.
His only victory in the Premier League this season was against the penultimate of the standings, Norwich City, on November 8, and since then he lost his two games against Burnley and the Saints.
Watford has scored only eight goals in the top English category this period, the lowest in the division, while he has conceded 28 goals in 14 games.
"Quique is a man of great integrity and it was clear how much he wanted to have a positive impact, but ultimately the results have dictated our decision," club president and chief executive Scott Duxbury said in a statement posted on the website. of the Watford.
"The appointment of a new head coach is imminent, and with almost two thirds of the remaining season, we will provide all the necessary support to make the next months be successful."
Flores, had directed the club outstandingly in the 2015-16 season, and returned to Vicarage Road in September, replacing Javi Gracia after a slow start to the season, but could not correct the bad results.
The former coach of Valencia and Atletico de Madrid took over 12 games in all competitions, adding two wins, four draws and six losses, including a trip 8-0 against Manchester City.
"I suffer for the fans, I suffer for the players and I suffer for the owner, of course," Sanchez Flores told reporters after Saturday's defeat.
Former Newcastle United and Brighton coach Chris Hughton is one of the leading candidates for the Watford position.