Hill has left Sixways with immediate effect after almost three seasons in charge, during which time he led Worcester to promotion and twice kept the club in the top flight.
But Worcester cannot finish any higher than ninth place and Hill failed to deliver the progress the board had wanted to see this season.
Bill Bolsover, chairman of Worcester's rugby committee, said: "Richard was brought into Worcester Warriors to get us promoted back to the Premiership, which he successfully achieved. We then wanted to consolidate our position amongst the elite before breaking out of the bottom four.
"Despite all his hard work, effort, attention to detail and honesty, we have not continued the forward momentum. On behalf of everyone at Worcester Warriors, I would like to put on record our thanks and appreciation to Richard and we wish him well for the future."
Hill's coaching team and Worcester's rugby operations director Corin Palmer will take charge of the team for the final two Premiership matches of the season, against Harlequins and London Welsh.
Ryan immediately emerged as the favourite to replace Hill. His last coaching role in the Premiership was at Gloucester, where he spent four years in charge up until 2009.
Since then, the former England number eight has built a reputation as an astute and insightful analyst through his work for Sky Sports.
Ryan returned to hands-on coaching during the RBS 6 Nations, when he drilled the Scotland forwards as part of Scott Johnson's interim coaching team for the championship.
Whoever takes over at Sixways will have to build a new team without key men Matt Kvesic, Matt Mullan and Andy Goode who have all signed for rival Premiership clubs.
- Sports & Recreation
- Worcester Warriors