The Russian Football Union has confirmed they have ended their contract with national team coach three years before the country hosts the 2018 World Cup finals.
Capello, who managed England at the 2010 World Cup, took the job in July 2012 and had extended his contract until the end of the 2018 tournament.
He took the team to the World Cup finals in Brazil last summer but they were knocked out in the group stages.
The team’s form has not improved since then and they suffered a disappointing 1-0 loss at home to Austria in their European qualifier on June 14, leaving them third in Group G with eight points from six games.
There had been persistent allegations of non-payment of salary for Capello and the RFU had been holding talks with Capello over his contract since late June.
The RFU’s debts had sparked speculation that it could not afford to fire Capello given the size of the compensation involved, reportedly more than £10m.
Nikita Simonyan, the RFU’s acting president, said last week that all debts owed to Capello until the end of the 2014/15 season had been paid off.
Local media have quoted sources as saying CSKA Moscow coach Leonid Slutski is expected to take over.