In announcing the decision, USF Athletic Director Doug Woolard said Holtz's whole body of work over the last two years was taken into consideration.
Holtz finished his third year at the helm Saturday night with a 27-3 loss to Pittsburgh. The last two seasons the Bulls finished last in the Big East Conference with a 1-6 record each year. The 3-9 record turned in by this year's team is the program's worst.
The Bulls failed to qualiy for a bowl the last two seasons after going to bowls the previous six years. Holtz was 16-21 during his three years and 8-16 the last two.
"While our program remains young, having just completed our 16th season of competition, our history is rich, and the expectations of coaches, players, students, administrators and fans are high. That is why the past few months have been hard for all of us," Woolard said. "It is not easy to part ways with such a good man. I am thankful for his friendship, and for what he has done for USF Athletics.
"However, my responsibility to our students, our fan base and the university as a whole is clear. We must strive to put a more successful football program on the field. Beginning today, we will move in a new direction toward that goal."
USF will have to pay Holtz $2.5 million dollars over five years as part of the buyout from his contract, Woolard said. He also said that would not hinder the school in searching for the best possible candidate and money was not an issue.
"We will immediately begin a search for a new head coach," Woolard said. "We will move as quickly as possible, but will be as thorough as necessary to find the best fit for our football program here at USF. We will enlist the expertise of university officials, community leaders, and leaders in the world of intercollegiate athletics."
In Holtz's final game, USF was held to a program record low 117 yards and in the final 15 quarters of the season the Bulls scored one touchdown. He lost 14 of his last 16 Big East games.
USF's offense suffered a big blow when quarterback B.J. Daniels was lost for the season on November 3d against Connecticutt. But the Bulls defense has been its biggest problem the last two seasons.