Gonzalez, who admitted before the match that his future was at stake, paid the price for Espanyol's 4-3 extra-time loss to Sestao.
"Espanyol, on behalf of club president Alan Pace, and its Board of Directors, wish to express our gratitude to Manolo Gonzalez for the work, commitment, and effort he has shown since taking charge of the first team," Espanyol said in a statement.
"The club particularly values the professionalism and dedication he brought to his role, as well as the way he tackled the various sporting challenges he faced."
Appointed in March 2024, Gonzalez guided Espanyol to promotion within months of taking charge and then kept the Catalan club in LaLiga over the following two seasons.
"(I'm) feeling really down, completely shattered, and bearing the full weight of responsibility for everything," Gonzalez told reporters after the defeat to Sestao.
"It’s one of the worst days of my life, without a doubt."
Espanyol have struggled for form in 2026, losing five of Gonzalez's final six games in charge.
They are 18th in the LaLiga standings with eight points and host Villarreal on Friday.