It is widely speculated that the axe fell on Van Gundy as part of Dwight Howard's conditions to waive the early-termination option on his contract.
Whether that is the case or the Magic just wanted to move the team in a different direction, the Magic must decide who will be taking over.
Here is a look at the coaches the Magic should consider.
But the Magic have to try, right?
The Zen Master boasts a career winning percentage of .704, led teams to 11 NBA championships and would be welcomed with open arms by the Orlando faithful.
If the Magic could persuade Jackson to take over, then it might make Dwight Howard want to stay in town.
The last time Jackson coached teams with dominating big men, he won multiple championships.
Howard fits that bill.
Orlando is no Chicago or Los Angeles, so Magic fans should continue to view this as fantasy.
Much like Phil Jackson, the notion of luring Jerry Sloan out of retirement is a long-shot.
Or is it?
Sloan has coached in the NBA for 26 seasons, the last 23 with the Jazz.
But he still lacks that elusive championship.
Sloan could be the high-profile name that could persuade D12 to stick around and let the Magic build a championship team around him.
Sloan knows how to win in this league and would be very successful in Orlando.
This is much more likely now than it was a couple of days ago.
He compiled a sub-.500 winning percentage in his time in Portland.
So why would the Magic want him?
Because he was on Dwight Howard's supposed short list of new coaches.
At a time where everyone in the Orlando Magic organization is doing anything and everything to appease their disgruntled star, they must take a long look at the guys on his list.
McMillan did have some success while in Portland. Maybe if the Magic tab him as the next coach, it would convince Howard to sign an extension.
With a sub-standard roster for his style of play, he never got things rolling in New York and resigned prior to the end of this season.
However, it is rumored that D'Antoni would be "very interested" in coaching the Magic.
While it is unclear how Dwight would feel about a move to D'Antoni's style of offense, it could land free agent point guard Steve Nash.
Nash had two MVP seasons under D'Antoni in Phoenix and could possibly be interested in rejoining him in Orlando.
A D'Antoni/Nash combo could be enough to make Howard want to sign an extension, as Nash was on his list of players he wanted the Magic to acquire at the trade deadline.
Shaw was seemingly being groomed to take over for Phil Jackson in Los Angeles before being passed over in favor of Mike Brown.
Shaw is deserving of a shot to lead an NBA team.
And maybe the Magic is that team.
Shaw is another of the coaches on Howard's wish list. He is familiar with the organization and has had tremendous success as an assistant.
So it is no surprise that he is rumored to be the favorite to take over.
Shaw is a young coach that could infuse energy into the team and has backing from Howard.
He should be considered a viable candidate in this search.
Probably the most unheralded candidate on this list, San Antonio Spurs' assistant coach Mike Budenholzer can carry his weight with what he brings to the table.
He has spent the past 18 seasons under Gregg Popovich, who is widely considered the best active coach in the NBA.
Budenholzer has been a part of four championship teams during his time in San Antonio and has been the Spurs' top assistant since 2007.
The Magic have hinted that they would like a coach with championship experience.
Mike Budenholzer has that experience.
While not the high-profile name, he would bring the respect and reputation of the Popovich regime.
For too long, Budenholzer has been overlooked as a head coaching candidate, so it is about time he gets his opportunity.
Hall of Fame center Patrick Ewing was hired by Stan Van Gundy and has been an assistant coach for Orlando since 2007.
Howard's development into the dominating post-player he has become should be attributed in large part to Ewing's coaching.
A center of his caliber can teach a lot to a young player.
He should at least be considered by Orlando.
Ewing has played a vital role in Howard's development thus far, so keeping the two paired up could mean great things for both of their careers.