The 31-year-old, who was in his first managerial role, appears to have paid the price for a shock League Cup exit.
A Hearts statement read: "The board wishes it to be known that this was a very difficult decision, reluctantly made, as every member of the board recognises Ian is an extremely talented young coach with a very bright future.
"We thank Ian for all of his efforts and wish him well in the future."
Former Newcastle United, Valencia and Rio Ave coach Cathro was appointed head coach at Tynecastle in December, working under the club's director of football Craig Levein.
The Scot oversaw a 2-0 defeat away to Rangers in his first game, and in the 22 Premiership matches he was in charge last term his side lost 13, drew four and won five.
As a result, the Jambos finished fifth and missed out on a spot in Europe.
His side were also knocked out of the Scottish Cup in a replay against city rivals Hibernian.
Cathro was backed in the summer as the club brought in a number of new faces, including Northern Ireland striker Kyle Lafferty and Scotland defender Christophe Berra.
The Gorgie men open their Premiership campaign at Celtic Park on Saturday, but results in the League Cup appear to have cost Cathro.
Hearts started the group stage with wins over Elgin City and East Fife but lost at League One outfit Peterhead and then drew 2-2 with Dunfermline, losing the resulting penalty shootout and crashing out of the tournament.
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Hearts have sacked head coach Ian Cathro after seven months in charge.