Texas A&M was supposed to return to national prominence this season.
Instead the Aggies finished the regular season with a disappointing 6-6 record that cost Mike Sherman his job.
Athletic director Bill Byrne announced Sherman's firing in a statement Thursday night.
The Aggies, who are leaving the Big 12 for the SEC next season, must now find a replacement to lead the team into their highly competitive new league.
The school hasn't named any candidates, but possible replacements could include Houston coach Kevin Sumlin or Louisville coach Charlie Strong. Sumlin, who has led the seventh-ranked Cougars to a 12-0 record, was an assistant at A&M from 2001-02. Strong also spent time with the Aggies, working as a graduate assistant in 1985.
Sherman, 25-25 in four seasons at A&M, had three years remaining on his contract and the buyout will be about $5.8 million. He was given a one-year extension to his original contract in July, but it was never executed.
He was hired at the end of the 2007 season three days after Dennis Franchione resigned.
His best and only winning season came last year, when the Aggies won their last six regular-season games and lost in the Cotton Bowl to finish 9-4.
"I appreciate Coach Sherman's selfless service to Texas A&M as our head football coach and his tireless efforts in building leaders of character," Byrne said in the statement. "He is truly one of the great offensive minds in football, both collegiate and professional, and I know that he has much to offer the game of football in the future."
Byrne said he will talk with the assistant coaches to decide who will serve as the interim coach for Texas A&M's bowl game. He also hopes to meet with the team and remaining staff Friday.
Texas A&M President R. Bowen Loftin thanked Sherman for his contributions to the program and said he created a "solid foundation for Texas A&M to build upon in the future."
"Decisions of this nature are never easy, and I appreciate the patience of Aggies everywhere as we carefully evaluated the current state of our football program and the prospects for the future," Loftin said.
The Aggies entered this season with 18 returning starters, a top-10 ranking and were expected to contend for the Big 12 championship and be a factor in the national title hunt.
Instead they lost early games to Oklahoma State and Arkansas after holding double-digit halftime leads to fall to 2-2.
They won three in a row after their first skid, but a three-game losing streak, which included two overtime losses, ensured the Aggies of a mediocre season. The low point of the season came when Texas A&M ended its more than century-old rivalry with Texas with a 27-25 loss at home on Thanksgiving.
At times, Sherman seemed to be grasping for ways to deal the team's narrow losses. Four of their six defeats were by a combined 10 points, including a 53-50 four-overtime loss to Kansas State.
"I've never experienced a season like this and I don't plan on experiencing a season like it again," Sherman said after the loss to Texas. "This was a very difficult season to swallow. We have good kids, they work hard, but for whatever reason the ball bounced funny for us sometimes, and we didn't make the play when we need to make it to win the games we didn't."
Current and former players expressed their thanks and support for Sherman via Twitter as they learned the news on Thursday night.
"It's unfortunate to see Coach Sherm go. He is like another father to me. He helped me become the person I am today. I will never forget, never," tweeted Von Miller, the former A&M pass-rusher taken second overall in the year's draft by the Denver Broncos.
Texas A&M quarterback Ryan Tannehill was disappointed to see Sherman leave.
"I consider myself fortunate to have had the opportunity to play for such a great coach and great man as Mike Sherman," he said. "He helped us become not only better football players, but better men. ... He will be missed."
Sherman came to Texas A&M after spending two seasons a Houston Texans assistant coach. A&M was his first college job since he worked as an assistant with the Aggies from 1995-96.
After leaving A&M he was an assistant for Green Bay and Seattle before becoming the Packers' coach in 2000. Green Bay went 59-43 under Sherman and won three NFC North titles in six seasons, but he was fired after the Packers finished 4-12 in 2005.
The change gives the Aggies a chance for a fresh start when they move into the SEC next season. They end their time in the Big 12 after a decade filled mostly with disappointing finishes. The team had more than seven wins just twice since 2002.
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