The Dolphins opened the 2025 campaign by dropping six of their first seven games, leading to the dismissal of general manager Chris Grier in October.
Team owner Stephen Ross chose to wait until the season concluded before making any decision about McDaniel’s future.
Miami ended the campaign at 7-10 and failed to qualify for the playoffs for the second season running.
"After careful evaluation and extensive discussions since the season ended, I have made the decision that our organisation is in need of comprehensive change," Ross said in a statement.
"I informed Mike McDaniel this morning that he has been relieved of his duties as head coach.
"I love Mike and want to thank him for his hard work, commitment, and the energy he brought to our organisation.
"Mike is an incredibly creative football mind whose passion for the game and his players was evident every day. I wish him and his family the best moving forward."
McDaniel, 42, compiled a 35-33 (.515) record during his tenure, reaching the postseason twice in his first two seasons, without winning a single postseason game.