NFL Network's Ian Rapoport first reported the news.
Pagano's firing came after a season-closing, 22-13 win over the Houston Texans.
Pagano led the Colts to the playoffs in each of his first three seasons, but the past three campaigns have been a struggle.
Overall, Pagano went 53-43 as Indy's head coach.
In 2012, 2013 and 2014, the Colts went 11-5 each season and won a pair of AFC South titles. They also improved their playoff finish with each passing year, ultimately reaching the AFC Championship Game in 2014.
The Colts fell to 8-8 in both 2015 and 2016, however, and Pagano narrowly avoided losing his job at the conclusion of the 2016 campaign.
Pagano was retained after the firing of general manager Ryan Grigson, but the Colts bottomed out without Luck in the fold.
Prior to joining the Colts, Pagano had a successful run with the Baltimore Ravens as their secondary coach from 2008 through 2010 and their defensive coordinator in 2011.
His defensive success didn't translate to his time with the Colts, though, as they ranked in the bottom third of the league in yardage and points allowed in each of the past three seasons.
Offense largely kept the Colts afloat during Pagano's stint, but that side of the ball lacked dynamism in 2017 due to Luck's absence.
The Colts have a chance to return to contention in the AFC South next season if Luck can get healthy, but major improvements are needed on both sides of the ball.
Indianapolis will also be under new leadership in 2018, and the search for its fourth head coach since 2008 is set to commence.