They are currently 19th in the Premier League table following a 2-1 defeat to Swansea on Saturday - its sixth straight league loss.
The club said in a statement: "The board believes the results on the pitch were simply not good enough and that a change is imperative."
David Moyes is among those in the frame to replace Sherwood,
Kevin MacDonald who is the U21 manager has been placed in interim charge.
He was appointed in February to replace Paul Lambert, Tim reached the FA Cup final and led the club to a 17th-placed finish in his first season in charge, but has won one of ten league matches this term.
Villa have not won since the opening day and are four points from safety.

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