Coach Andy Dawson has been placed in charge on an interim basis.
Walter had previously managed Holstein Kiel, Stuttgart and Hamburg in the German second tier, leaving the latter after being sacked in February this year.
His preparations for the season were not helped by the losses of key defender Jacob Greaves to Ipswich, winger Jaden Philogene back to Aston Villa, and the end of the loan spells of forward Fabio Carvalho and striker Liam Delap, who had joined from Liverpool and Manchester City respectively.
The Tigers failed to win any of their first six games of the campaign in all competitions but successive wins against Stoke, Cardiff and QPR got them going in the right direction.
That run of form came to an end with a 4-0 reverse at Norwich and they failed to win any of the subsequent eight matches.
In the midst of what proved to be his final games, Walter drew criticism from fans after supporting the club’s decision to use music after goals scored in home games and then questioned the backing in the home draw with bottom side Portsmouth.
Ilicali had said he felt the relationship between the fans and Walter was “repairable” before Tuesday’s game against the Owls but, with a trip to high-flying Middlesbrough to come on Saturday, he has now taken action.
Hull City are the fifth Championship team to change manager this season after Preston, Stoke, Cardiff and Coventry.
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