The 51-year-old penned a three-year contract in June 2015 but could only guide the Blades to 11th in Sky Bet League 1, eight points adrift of the play-off places.
With the team facing a sixth successive season in the third tier, the United hierarchy announced that former Southampton and Reading boss Adkins would not be kept on in South Yorkshire.
A statement on the club's official website read: "A decision has been made by the board of Sheffield United for Nigel to depart immediately.
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"Nigel is a gentleman and, as proved by his record, a very good manager, but the overriding aim is promotion from League One and the club feels that this is the correct time to make a change.
"We will now begin the process of bringing in a new manager. We hope to make an appointment very shortly, with promotion from this division once again the priority. This is a decision made jointly between the co-owners and is the result of discussions between board members and colleagues.
"We sincerely wish Nigel and his backroom staff, Andy Crosby and Dean Wilkins all the best for the future."
Adkins had three promotions out of the third tier on his record when he arrived and expressed his disappointment that he was departing just one year into his deal.
"I am proud and honoured to have been the manager of Sheffield United but saddened to leave after just one season," he added.
"I am naturally very disappointed not to be able to continue the good work going on behind the scenes, which I am confident will be of benefit to the club going forward. I wish the club and the supporters the best of luck for the future."
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