Former Livingston, Morton, Coventry City, Hibernian and Dundee midfielder McPake began his coaching career with the club, leading the Dens Park side to the Premier League during his three years in charge.
The 40-year-old guided Pars to a sixth-placed finish after their first season back in the second tier, but they are currently three points behind Hamilton Academical, although nine ahead of bottom-placed Airdrieonians.
Dunfermline say the decision to sack McPake was made by the current board but “has made a potential investor in the club aware” of their intentions.
German football investment group Fussball GmbH put the Fife club up for sale in August.
Meanwhile, current under-18 and reserve team coach John McLaughlan has been asked to prepare the team ahead of Friday’s visit of the League leaders.
Dunfermline’s decision means both Fife clubs in the Championship are looking for a new manager after Neill Collins left Rovers on Saturday to take charge of leading Sacramento Republic into the USL Championship after just three months at Stark’s Park.
