A statement on the club's website: "AC Milan announces that it has dismissed as coach of the first team, with immediate effect, Mr. Massimiliano Allegri and his staff.
"AC Milan would like to thank Mr. Allegri and his staff for the work done and wishes them the best professional success. The team will be run on a caretaker basis by Mr. Mauro Tassotti," it added.
Allegri had called the 4-3 defeat strange, saying: "It's an ugly defeat, a strange one because we were 2-0 up after 13 minutes and it all seemed easy. We conceded three goals, almost all identical, in the first half. Sassuolo played good football, but we played badly as a team and as individuals with too many mistakes."
Milan's sensational loss to Sassuolo was believed to be the last straw that crushed Allegri who had announced he would leave at the end of the season.
The 46-year-old took over at San Siro in June 2010 and went on to win the Scudetto in his first season, before finishing second in 2011-12 and managing third place last season.
Milan are now ranked 11th in Serie A table on 22 points, 30 points adrift of leaders Juventus.
--IANS (Posted on 13-01-2014)