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Giampaolo was appointed in June and tasked with trying to end the club's eight-year trophy drought and take them back to the Champions League after a six-season absence.
Yet his tenure got off to a terrible start and he was ousted despite the club ending a three-match losing streak with victory over Genoa on Saturday.
"AC Milan announces it has relieved Mr. Marco Giampaolo from his position as coach of the First Team," the club said in a statement.
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"The Club is grateful to Marco for the work carried out and wishes him all the best to come in his professional career."
Italian sports daily newspaper La Gazzetta dello Sport reported that Giampaolo would be replaced by former Lazio and Inter Milan coach Stefano Pioli.
Pioli's last job was at Fiorentina, whom he left in April during his second season in charge.
Seven-time European champions AC Milan won the last of their 18 Serie A titles in 2011.