Jenkins was informed of the decision in a meeting with WRU chief executive Roger Lewis and chairman David Pickering at the team hotel yesterday.
After fighting back from 25-3 down, Wales appeared to have the match won eight minutes from time when flanker Martyn Williams picked off a pass from Fijian fly-half Nicky Little and sprinted away for the try.
But Fiji, having given so much over the previous 72 minutes, refused to concede defeat and prop Graham Dewes was driven over for the winning try.
Fiji now head to Marseille for a quarter-final against South Africa, their first appearance in the knockout stages since the inaugural World Cup in 1987.
Jenkins paid the price for failing to meet the minimum expectations of a place in the World Cup quarter-finals and the WRU will now launch a worldwide search for a replacement.
The rest of the Wales coaching staff – Nigel Davies, Neil Jenkins, Robin McBryde and Rowland Phillips – will all have their positions reviewed by the WRU in the coming days.
The writing was on the wall for Jenkins within hours of last night’s 38-34 defeat to Fiji, which condemned Wales to their worst World Cup performance in the professional era.
He was under contract until the end of the Six Nations and wanted a chance to present his case to the WRU board. It was not granted. The board met in Nantes on Saturday night and it was decided Jenkins should stand down so planning for the 2011 World Cup could begin immediately.
Jenkins had been the obvious choice and clear favourite when he took over from caretaker coach Scott Johnson in the spring of 2006. He began the year by declaring his vision for Wales winning the World Cup “the Welsh way”. Jenkins was convinced his side could at the very least emulate the achievements of the 1987 team that finished third. But those ambitions were gradually scaled down as the results failed to materialise and the pressure began to rise.
In the end, he was in the job for just 16 months and leaves with a disappointing record of six wins and one draw from 20 Test matches.
The hunt for a replacement head coach begins immediately. Johnson, a member of the 2005 Grand Slam coaching team, was installed as an early favourite.
The likes of Eddie Jones, Nick Mallett and Warren Gatland will be considered potential targets.
Jenkins’ successor at Llanelli, Phil Davies, would be the front-runner among the domestic Welsh candidates. Newport Gwent Dragons coach Paul Turner has already ruled himself out.
Tries: Popham, S. Williams, G. Thomas, M. Jones, M. Williams. Cons: Hook, S. Jones 2. Pens: S. Jones.
G. Thomas, M. Jones, Shanklin, Hook, S. Williams, S. Jones, Peel, Jenkins, Rees, Horsman, A. Jones, Evans, Charvis, M. Williams, Popham.
Phillips for Peel (57), R. Thomas for Rees (47), D. Jones for Horsman (66), Gough for Evans (66), Owen for Popham (66).
Tries: Qera, Delasau, Leawere, Dewes. Cons: Little 3. Pens: Little 4.
Ratuvou, Delasau, Rabeni, Bai, Neivua, Little, Rauluni, Dewes, Koto, Railomo, Leawere, Rawaqa, Naevo, Qera, Koyamaibole.
Ligairi for Rabeni (67), Bobo for Neivua (52), Daunivucu for Little (80), Sauturaga for Koto (78), Qiodravu for Railomo (54), Ratuva for Qera (74).
S Dickinson (Australia).