The club's president Augusto Cesar Lendoiro confirmed Toshack's departure after meeting the 47-year-old Welshman following yesterday's 2-2 league draw with Celta Vigo.
Deportivo are without a win so far this year. Toshack, who coached Real Madrid to the 1990 championship, joined Deportivo in 1995 and he has been locked in a row with the club's directors over their transfer policy. He has also come under pressure from local fans who have been greeting him at training sessions with banners proclaiming "Toshack go home".
Raul again saved Real Madrid as the Spanish league leaders conceded an early goal and laboured for a 3-2 victory at Hercules.
Barcelona's hopes of catching the leaders faded further when they lost 2-0 in the city derby to Espanyol. Florin Raducioiu, who failed to thrill West Ham's fans in his spell at Upton Park, scored both Espanyol's goals from the penalty spot at the Sarria stadium. Already trailing 1-0, Barcelona lost all hope when their Portuguese midfielder Luis Figo was sent off after a scrap midway through the fist half.
Real fell behind after five minutes against Hercules when Manuel Alfaro took a long pass and rounded Real's German goalkeeper Bodo Illgner, but goals from Pedrag Mijatovic and Clarence Seedorf put the league leaders ahead by the 23rd minute. Mijanovic equalised for Hercules in the 39th minute but Raul then made Real's journey home from Alicante a happy one eby scoring the winner.
Real's local rivals, Atletico Madrid, also started badly but the champions recovered in style to beat Compostela 4-1, while Real Betis secured third place with a 3-1 win over Extremadura.
Other Uefa Cup hopefuls slipped up. Real Sociedad are five points behind Betis after losing 1-0 to Valencia on Saturday but stayed in fourth place on goal difference because of Deportivo La Coruna's 2-2 draw with Celta Vigo in the Galician derby.
At the other end of the table the former Argentina coach, Carlos Bilardo, directed his team by mobile phone from the stands but had to watch as Zaragoza scored a late goal to win 2-1.