In a surprise announcement on Tuesday, Real Madrid named Lopetegui as their next manager to start work after the tournament in Russia, sparking outrage among the federation and Spanish fans at the timing of the announcement.
At a severely delayed press conference at Spain's World Cup base in Krasnodar, Spanish football federation chief Luis Rubiales said he felt Lopetegui's decision to join Madrid so close to the start of the tournament "obliged" him to take drastic action.
"I am here to say that we feel obliged to sack the national team manager," said Rubiales.
Lopetegui had signed a contract extension until 2020 just last month and Rubiales is reportedly angry at only being informed of his decision to join Real minutes before the European champions made the announcement public.
"I have spoken with the players and I can guarantee that the new technical team will do everything they can. We are left in a very difficult situation," he said.
Lopetegui was appointed Spain coach in July 2016 and never tasted defeat in the job, leading the team through 20 unbeaten games ahead of the World Cup. La Roja were among the favourites to lift the trophy this summer but the astonishing developments of the past two days could have a devastating affect on their chances.
There were fears his appointment could open up old divisions between the Real Madrid and Barcelona factions in the Spain squad.
For the first time since 2006, there are more players from Madrid in a Spanish squad for a major tournament, with a six-strong Real contingent and just Gerard Pique, Jordi Alba and Sergio Busquets from Barca.
However, according to reports in the Spanish media, the players tried to intervene at the last minute to prevent Rubiales sacking Lopetegui. Lopetegui had a short playing career at both Madrid and Barcelona as a reserve goalkeeper.
However, his coaching career had been far from distinguished before being handed the role as Spain coach after a last-16 exit at Euro 2016 brought Vicente del Bosque's eight-year reign to an end.
After short spells at Rayo Vallecano and with Madrid's youth team Real Madrid Castilla, Lopetegui enjoyed a successful time with Spain's under-19s and under-21s.
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