The decision follows a Tuesday board meeting to discuss the rioting that caused the abandonment of their final round, second leg qualifier against Ivory Coast this month.
"Koto has been removed because targets were not achieved," the federation said in a statement.
Koto been acting coach since Amara Traore was fired in February after a disastrous 2012 African Cup of Nations finals for Senegal and had his appointment confirmed in July.
Senegal were trailing 2-0 in Dakar when home supporters caused the abandonment of the match by throwing missiles on to the pitch and lighting small fires in the stands.
The team were on their way out of the 2013 competition after being outplayed, 2-6 down on aggregate when play stopped. They have since been formally disqualified.
Koto, a former Senegal international, was also coach of the country's Under-23 side at the men's football tournament at the London Olympics this year.
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