Michel guided the club to back-to-back Super League titles, but has faced supporter unrest for the side's recent performances, although Olympiacos have won their last five games in all competitions and are just a point adrift of leaders PAOK.
Olympiacos also came to close to progressing out of their UEFA Champions League group this season following wins over Juventus and Atletico Madrid.
Regardless of results, Olympiacos officials have decided that the time has come to move in a new direction, ending Michel's tenure, which started in February 2013.
The club confirmed Michel's departure in a statement on Tuesday as well as wishing the 51-year-old Spaniard all the best for the future.
The move to Greece represented the first time that the former Real Madrid midfielder has coached outside of Spain following spells with Rayo Vallecano, Getafe and Sevilla.