The former England boss rejoined the Eredivisie side in January 2012 but has been unable to recreate the success of his first spell in charge.
McClaren guided the Enschede team to the Dutch league championship in 2010 following his ill-fated term in charge of England, which ended in embarrassing fashion after the defeat to Croatia knocked Wayne Rooney and his teammates out of Euro 2008 at the qualifying stage.
The "Wally with the Brolly" tag, as used by the Daily Mail, haunted McClaren after that 3-2 loss in the rain at Wembley in November 2007, and his short-lived reign came to an ignominious conclusion.
However, his time with England did not mask a successful career as a club coach and manager, which began at Derby County as assistant to Jim Smith in 1995.
McClaren succeeded Blackburn-bound Brian Kidd as No. 2 to Sir Alex Ferguson at Manchester United and would soon be celebrating the Champions League win over Bayern Munich.
Where Kidd failed to ignite Ewood Park in his first managerial role, McClaren succeeded, after leaving Old Trafford for the Middlesbrough hotseat.
He took over from Bryan Robson in 2001 and would go on to become the Riverside Stadium club's most successful manager with a 2004 League Cup triumph over Bolton and a 2006 UEFA Cup Final appearance, after two comebacks against FC Basel and Steaua Bucharest in the quarterfinals and semifinals, respectively.
McClaren was also an established member of the England backroom staff while managing Middlesbrough after being drafted into the setup by caretaker-manger Peter Taylor in October 2000 and was kept on by Sven-Goran Eriksson.
When Luis Felipe Scolari turned down an approach from the Football Association after Eriksson stepped down, the governing body turned to McClaren and gave him a four-year contract in 2006.
The move swiftly turned sour, and McClaren moved to Twente in 2008 where he restored his reputation as a coach, helping the club to remain in European competition beyond winter for the first time in their history in his first season and reach the Dutch Cup final, where they were beaten by Heerenveen on penalties.
In May 2010, McClaren guided Twente to their first-ever Eredivisie title but left the club for Wolfsburg that summer to become the first English manager in the German top flight.
His time at Wolfsburg was a disappointment, though, losing his first three matches in charge and he was sacked in February 2011.
A return to English football with Nottingham Forest was also unsuccessful and he resigned after just 10 league games.
Now, just over a year after returning to Twente, McClaren has left the club after a run of poor results.
So where does this leave McClaren? Three successive managerial stints have ended in disappointment and his reputation is damaged.
However, his previous successes at smaller clubs such as Middlesbrough and Twente do give the 51-year-old a foothold in club management and act as an attraction for an ambitious, yet under-achieving team.
Another opportunity in Europe is a possibility, but McClaren's failure at Nottingham Forest will be a spur for a return to England to prove himself once more after the England fiasco.
The Premier League may be out of reach for McClaren unless in an assistant role, but don't be surprised if a number of Championship chairmen's ears were pricked by Tuesday's news from De Grolsch Veste.