Incumbent Pat Lam will remain in charge for the remainder of this campaign and would be "eligible" to apply for the job, the three-times Super Rugby champions said in a statement.
Semi-finalists last year, the Blues came into the season with high expectations but their 35-19 loss to the Wellington Hurricanes last weekend left them rock bottom of the standings with just one victory in their first 10 matches.
"It's obvious for all to see that the Blues are having a very disappointing season so far in 2012 and this has brought about the need for some action," the New Zealand Rugby Union's General Manager of Professional Rugby Neil Sorensen said.
Lam has come in for a barrage of criticism as the Blues have continued to underperform despite having eight players in their squad who helped New Zealand win the World Cup.
Some of the criticism, which Lam dubbed "racist", focused on the Auckland-born former All Black's Samoan heritage and reduced him to tears at a press conference last month.
Blues chairman Gary Whetton said immediate action needed to be taken as this was the period when top coaches would be making decisions on their future.
"In order to ensure we have the best opportunity to garner interest from coaches both locally and abroad, this position needs to be advertised now," he said.
Lam has been in charge since 2009 and is contracted until the end of the year.