The news of the 52-year-old's departure comes at the end of a dramatic day at Elland Road which saw the club's ownership issues thrust into the spotlight.
Cellino, the owner of Serie A side Cagliari, has had a delegation in Leeds for the last week as he prepares to sign off a 75 per cent purchase of the club from Gulf Finance House.
One of his party is the former Middlesbrough defender Gianluca Festa and it is understood that on Tuesday it was asked if Festa could sit in the dugout with McDermott during Leeds' 1-1 draw with Ipswich.
It is thought Festa is Cellino's first choice to replace McDermott but until Friday the chance had not arisen.
But, as it emerged that Cellino was in the driving seat to buy the club after a management buyout by current managing director David Haigh collapsed, McDermott's position looked all the more vulnerable.
McDermott, who joined Leeds in April last year, gave a news conference on Friday afternoon during which he admitted that Saturday's game against Huddersfield could be his last before saying he intended to "enjoy" the occasion.
- Sports & Recreation
- Massimo Cellino
- Gianluca Festa