The club have decided the time is right to make a change after failing to reverse their poor recent form.
The Daggers’ 3-0 loss to Bromley on Saturday means they have taken only one point from their last seven matches.
The East London side have slipped to 19th - just two points above the relegation zone.
Club legend Terry Harris and coach Jody Brown will take over as Dagenham seek a way forward.
A statement read: “It is with disappointment that the Board of Dagenham & Redbridge announce that Peter Taylor has left the club with immediate effect.
“The club would firstly like to place on record its sincere thanks to Peter, who stepped in as manager in June 2018 when the club was under extreme pressure, and with his extensive expertise was able to assemble and guide the team.
“With that said, a change is required based on recent results in order to both enable sufficient time for the Board to select a replacement, and for the new manager to start and achieve the aspirations set forth by our investment group.
“Work has commenced on the search process for a new manager, but for the immediate future, day to day team affairs will be handled by Terry Harris and Jody Brown.”