Sources told ESPN FC after that loss that Emery's position was untenable, following Arsenal's worst run in 27 years.
The club are winless in all competitions in seven games and sit eight points behind fourth-place Chelsea in the Premier League after just 13 games this season.
"Our most sincere thanks go to Unai and his colleagues who were unrelenting in their efforts to get the club back to competing at the level we all expect and demand," Josh Kroenke said on behalf of the club's board. "We wish Unai and his team nothing but future success.
"The decision has been taken due to results and performances not being at the level required. We have asked Freddie Ljungberg to take responsibility for the first team as interim head coach. We have full confidence in Freddie to take us forward. The search for a new head coach is underway and we will make a further announcement when that process is complete."
Ljungberg posted on Twitter: "However long I oversee Arsenal for I will give everything I have to put smiles on faces again. We have a busy few weeks ahead and the team needs your support. Let's get to work!"
Emery issued a statement on the Arsenal website later on Friday thanking fans and saying it had been an honour to serve as the club's manager.
The statement read in part: "It has been an honour to be the Arsenal head coach. To all the fans, I want to thank you all from the bottom of my heart for helping me to understand and feel the greatness of Arsenal.
"To all of you who have supported us from every corner of the globe, all of you who have come to the Emirates, all of you who have waited in the rain and cold just to greet me after a game. I want to tell all of you that I have worked with passion, with commitment and with effort."
The Frankfurt game was played in front of a half-empty stadium and a group of Arsenal supporters unveiled "Emery Out" banners.
Arsenal's No. 2 goalkeeper Emiliano Martinez took responsibility and apologised to his former manager with a post on Twitter.
In 2018, Emery, who won three Europa League titles as Sevilla boss and the Ligue 1 title with Paris Saint-Germain, signed a two-year deal with the option of a third.
After succeeding Arsene Wenger in May 2018, Emery led Arsenal to the Europa League final in his first campaign in charge but the Gunners failed to qualify for the Champions League.
In total, Emery managed 51 Premier League games in total, winning 25, losing 13 and drawing 13.
Thank you @UnaiEmery_ and Javi I'm sorry we let you down , it's our fault for not performing the right way , I'm sure we will meet again❤️— Emiliano Martínez (@emimartinezz1) November 29, 2019
Gracias @UnaiEmery_ y Javi perdón por haberles fallado es nuestra culpa por no estar a la altura , nos volveremos a ver ❤️ pic.twitter.com/0mTrrjgUMv
Wolves boss Nuno Espirito Santo has been linked with the position but he said it would be "disrespectful" to comment on the situation.
"I think you know me well enough and you know that I'm not going to answer about that," he said earlier this week.
"I will never mention an issue that's not a reality. Mainly speaking about a job that has a manager on it. It would be disrespectful."
Manchester City boss Pep Guardiola weighed in on the situation at his regular Friday news conference due to rumours his assistant coach, former Arsenal midfielder Mikel Arteta, could take over from Emery.
"Every time a manager is sacked it's not good news, honestly," Guardiola said. "It doesn't change my opinion about his capacity. He's an incredible professional, did incredibly well in Spain. He won three Europa Leagues in a row with Sevilla, one of the most incredible achievements.
"[But Arteta] is with the squad and travels to Newcastle. Not a question for me."