The former Wrexham manager has left his post following this afternoon's FA Cup defeat at South Shields.
Owner Jason McGill has acted with the club failing to live up to expectations in the Vanarama National League North.
Mills failed to keep the team up last season but did lift the FA Trophy
"It is never an easy decision to sack a manager but the club needs to take this action based on the evidence of performances and results over the course of the last 12 months," he said.
“Having kept faith with Gary Mills in the wake of relegation last season, we are now 12 games into the new campaign and the current league position is unacceptable.
“Despite relegation, we have maintained our status as a full-time club. Since his appointment last October, the manager has received our full backing in his plans to overhaul the squad with one of the biggest spending budgets in this division.
"Unfortunately, the board does not feel that the aim of winning promotion this season is going to be achieved without this change," McGill added.