Allen's departure was announced on Tuesday, bringing an end to a hugely disappointing tenure for the 42-year-old.
Following his appointment in January 2012, he oversaw just eight victories in 36 games and a 38-14 pummelling at the hands of the Miami Dolphins at Wembley on Sunday left the Raiders with a dismal record of 0-4 this season.
"After thorough evaluation, we have determined to move in another direction," said Oakland's general manager Reggie McKenzie.
"We appreciate Dennis Allen's dedication to the organisation and wish him and his family nothing but the best in the future."
Sparano, a vastly experienced figure who led the Dolphins from 2008 to 2011, will step up from his previous position as Oakland's assistant head coach/offensive line.
"Tony Sparano has a strong presence in this organisation," added McKenzie.
"His experience and leadership qualities will serve the team well in helping reach the goal of everyone here, which is to win football games."