Al-Fayed's letter to the Fulham boss informing him of his decision and reproduced on the club's official website says: "I have never doubted your abilities as a coach and, equally, do recognise that there have been many achievements during your time at the club of which you can rightly be proud.
"Obviously, our position in the Premier League both this year and last year has been disappointing, particularly given the degree of investment and resources provided, and I am sure you would be the first to agree."
The contract of assistant manager Christian Damiano is also not being renewed.