Cox took Mansfield back into the Football League in 2013, winning the Conference title by two points from Kidderminster Harriers.
An 11th-place finish followed last term but Mansfield have exhibited disappointing form so far this season and sit 19th in English football's fourth tier with 19 points from 17 games.
Cox also saw his side held in the FA Cup by non-League outfit Concord Rangers in midweek, Jordan Chiedozie's stunning 18th-minute strike ensuring Mansfield must win a replay if they are to reach the second round.
The disappointing draw at the One Call Stadium, which saw sections of the home support voice their frustrations, proved Cox's last match at the helm, with player and assistant manager Adam Murray placed in charge for Saturday's visit of Plymouth Argyle.
"I've had a long discussion with Paul Cox this afternoon about the future of the club," explained chairman John Radford in a statement on Friday.
"As you know, this is a club which both Paul and myself hold very close to our hearts.
"Unfortunately, as a result of those discussions, Paul and I have regrettably reached the conclusion that it's in the best interests of Mansfield Town Football Club if he stepped down from his current role with immediate effect.
"Therefore, the search now begins for a new manager."
"I want to thank Paul for everything which he has achieved with the club over the past three-and-a-half years. We wish him the very best of success in the future.
"Finally, it remains for me to ask for all supporters to unite behind the club and whoever is appointed as our new manager, to ensure that the team has the best chance of achieving the successes on the pitch that we all want."