Capello had been in charge of the Chinese Super League side since June 2017, and will be replaced by Romanian Cosmin Olaroiu who has agreed a three-year contract.
The Italian leaves Jiangsu Suning following a poor start to the season with club languishing 12th in the league after picking up just three points in their first three games.
The recent 4-1 loss to Chongqing Dangdai prompted owner Lifan Zhang Jindong, who also has a major stake with Inter Milan, to take action and replace Capello with Olaroiut.
Capello's departure from management in China could put the former England boss in line for a return to international football with Italy, who are currently looking for a replacement for Gian Piero Ventura.
Ventura was sacked after Italy's shock failure to qualify for the World Cup last November and the national side have U21 boss Luigi Di Biagio in charge on an interim basis.
Other names linked with the Italy job are Zenit St Petersburg coach Roberto Mancini, Chelsea boss Antonio Conte, former Leicester coach Claudio Ranieri, now in charge of French club Nantes, and Carlo Ancelotti, who is available after being sacked by Bayern Munich.