Tommy Sheppard, the team's senior vice president of basketball operations, will step into Grunfeld's role on an interim basis while the team conducts a search for a new head of basketball operations.
The 63-year-old Grunfeld had been a front office decision-maker for the Wizards since 2003 following a 10-year stint as the New York Knicks' general manager and four years as GM of the Milwaukee Bucks.
Washington is 11th in the Eastern Conference with a 32-46 record this season, and it will miss the playoffs after making it to the postseason in four of the previous five campaigns.
Wizards owner Ted Leonsis released a statement regarding Grunfeld's dismissal:
"We did not meet our stated goals of qualifying for the playoffs this season and, despite playing with injuries to several key players, we have a culture of accountability and a responsibility of managing to positive outcomes. I wish to thank Ernie for his service to the Washington Wizards. He and his family have been great leaders in our community and have worked tirelessly to make us a top NBA franchise."
SI.com's Chris Mannix reported that Sheppard could be a strong candidate to replace Grunfeld on a full-time basis:
Grunfeld was at the helm for 16 seasons in Washington. During that time, the team went 568-724 and reached the playoffs on eight occasions. The Wizards never managed to make it past the second round of the playoffs, however.
Washington stumbled this season with All-Star point guard John Wall missing all but 32 games with an Achilles injury. Additionally, Grunfeld made some questionable trades.
Most notably, he dealt promising, young small forward Kelly Oubre Jr. to the Phoenix Suns for 33-year-old Trevor Ariza. Since the trade, Oubre has blossomed with averages of 16.9 points and 4.9 rebounds per game in 40 contests with the Suns.
Grunfeld also sent small forward Otto Porter Jr. to the Chicago Bulls for power forwards Bobby Portis and Jabari Parker. Porter was the No. 3 overall pick in the 2013 NBA draft and had improved in each of his first five NBA seasons entering 2018-19.
In 15 games with the Bulls, Porter has averaged 17.5 points, 5.5 rebounds and 2.7 assists.
With a pair of All-Star guards in Wall and Bradley Beal, the Wizards have a strong nucleus that could get Washington back in contention in the Eastern Conference with the right supporting cast. For the first time in 16 years, Grunfeld won't be the one in charge of assembling it.