The club's board convened twice on Tuesday, ultimately determining there was little option but to sever ties with the third-year coach after his last-placed Rabbitohs won only one of seven games to begin the year.
A club statement pointed to a "less-than-satisfactory series of results" over the past two seasons as grounds for the termination. Demetriou was also in charge when the side crashed out of finals contention in 2023.
"The board and management feel that now is the time to make a change to the leadership of our football program in terms of the head coaching role," said chief executive Blake Solly.
"There is no doubting Jason's work ethic or his drive for success, but unfortunately that success has not been forthcoming over the past 12 months."
Assistant coach Ben Hornby, once tipped as head-coaching material by Demetriou himself, will take charge of Thursday's clash against reigning premiers Penrith and for the remainder of the season.
Solly will front the media in Maroubra early on Wednesday morning, with Hornby expected to follow after the team's captain's run.
Jason Demetriou has paid the price for South Sydney's poor start to the 2024 NRL season. (Dan Himbrechts/AAP PHOTOS)
Demetriou had survived swirling rumours about his job security by guiding the Rabbitohs to a spirited 34-22 loss to high-flying Cronulla in their last game before the bye in round seven.
But Souths hit a new low in round eight, conceding the most points in any game of Demetriou's tenure as they were thrashed 54-20 by Melbourne.
Demetriou held his final training session in the pouring Sydney rain on Tuesday as the board met for the first time to deliberate his future.
The coach had arrived at Rabbitohs headquarters before 7am and was seen embracing players at training as his fate hung in the balance.
As he left at 1pm, Demetriou told reporters he was not aware of any coaching changes and admitted the ongoing speculation had been trying.
"It's not easy but it is what it is," Demetriou said.
"It's a big club, we're not performing, so questions have to be asked. I understand that, I respect it."
Souths had tied Demetriou to a two-year contract extension only last October, though it is understood a clause in that deal entitles him to only nine months of wages as his payout.
The Rabbitohs finish Demetriou's 58-game full-time tenure with a 50 per cent winning record, but only a 25 per cent record across his last 20 games in charge.
Souths had led the competition through 11 rounds last year but things began to unravel spectacularly after star player Latrell Mitchell suffered a long-term calf injury.
During the slump that followed, Demetriou came under fire for allegedly giving the club's star players preferential treatment, with club legend and assistant coach Sam Burgess leaving amid the rumours.
Five-eighth Jack Wighton was among the players to show their support for Demetriou on Tuesday. (Dan Himbrechts/AAP PHOTOS)
The Rabbitohs missed finals for the first time since 2017 by losing a must-win clash against rivals the Sydney Roosters in round 27, and have not been in the top eight since.
During their poor start to 2024, South Sydney have been heavily linked with ex-Rabbitohs coach Bennett, Demetriou's former mentor who is due to leave the Dolphins at the end of the season.
Bennett, who led South Sydney to the 2021 grand final, was coy when quizzed about his coaching future beyond this year.
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