The defeat, which saw Walsall drop to fourth in the table on goal difference, was a sixth successive home game they had failed to win.
Indeed their last victory came against Doncaster Rovers at the Keepmoat - a 2-1 success on February 2.
Walsall have been among the promotion contenders for most of the season but poor from in front of their own fans has cost O'Driscoll his job.
O'Driscoll, who moved to the Banks's Stadium following the departure of Dean Smith to Brentford, was also England Under-19 manager and had a short spell as assistant manager to Brendan Rodgers at Liverpool.
The club said in a statement: "Walsall Football Club can today announce that it has parted company with head coach Sean O'Driscoll with immediate effect."
Walsall chief executive Stefan Gamble said: "On behalf of the board we thank Sean for his time, effort and dedication during his short spell at the club and wish him well for the future."
O'Driscoll added: "I am extremely disappointed for the players, their performances over the past month have not gained the points they deserved.
"This is a different phase of the season, and as we have repeatedly seen, teams have recognised the team's strengths from the first half of the campaign and prepared to counter that when facing us.
"But the players deserve enormous credit for adapting, finding different ways to play and maintaining their performance levels even, at times, in the face of frustration and disappointment.
"They are a close group whose success so far has been built on the trust, understanding and respect among them. I wish them the best for the rest of the season."
O'Driscoll spent five years as manager of Rovers, during which time he took the club into the Championship in 2008, by way of a play off victory over Leeds Unied.