The Football Association of Malaysia (FAM) also removed team manager Soh Chin Aun, the official Bernama news agency reported.
The decision was made during a meeting chaired by FAM president Sultan Ahmad Shah Sunday, the agency said.
"The meeting... unanimously agreed to end Sathianathan’s contract with one month’s notice for a number of reasons while Soh Chin Aun’s service will stop immediately," FAM deputy president Redzuan Sheikh Ahmad said.
Malaysia were roundly beaten by the UAE on January 21, going down 5-0.
In December the Malaysian team crashed out of the Southeast Asia AFF Suzuki Cup in the group stages. There were reports at the time that Malaysia would appoint a new foreign coach.
However, FAM said Sathianathan should not be blamed for the team’s poor performance in the AFF Suzuki Cup and said they wanted him to stay for another year.
Malaysia has had a number of foreign coaches over the past five decades including Frenchman Claude Le Roy and Hungarian Bertalan Bicskei.