Van Gundy, who said in March that Howard wanted him fired, was named head coach of the Magic in 2007 and led the team to the NBA Finals in 2009.
The Magic, who were eliminated in the first round of the playoffs by the Indiana Pacers two weeks ago, also said General Manager Otis Smith and the team mutually agreed to part ways.
"These are the days you dread in this business, but we feel it's time for new leadership and new voices," Orlando Chief Executive Alex Martins said in a statement.
"The disappointment of getting eliminated in the first round of the playoffs these past two seasons played a primary role in our decision, as we feel our momentum towards winning a championship has paused."
Van Gundy had a 259-135 record with the Magic and led the team to the postseason in each of his five seasons in charge, including three Southeast Division titles.
But the team never reached its goal of winning a NBA title as Howard, who decided in March to stick with the team for at least another year, missed the end of the season after having back surgery in April.
Smith had been the Magic's general manager since 2006.