The club have acted quickly after Saturday's poor 2-0 loss away at West Ham, which leaves Wolves in the relegation zone with just one win from the first eight Premier League games.
Lage has been under pressure with his side scoring just three goals in those eight games, with the mood among the fan base turning sour in recent weeks – particularly after the defeat to the Hammers.
The 46-year-old had a good start to life at Wolves last season as the club challenged for European football, before a terrible end to the season saw them slip to 10th.
Despite a big turnover in players this summer, that poor run continued into this season, as Wolves have won just one game in the last 15 across both seasons.
The Wolves board did not meet on Saturday evening after the loss to West Ham, but conversations began on Sunday with Lage's future in doubt.
Now, the club have chosen to replace him with a poor return on the £113.4million they invested in the summer. That figure includes the £12million Wolves spent to make Hwnag Hee-chan's loan permanent.
Among Wolves' five permanent signings this summer, the club also smashed their transfer record with the £38million capture of Matheus Nunes, which could rise to £42million.
After making a significant investment, the club have been disappointed with the start to the season and will now look to appoint a successor to Lage.
In a club statement, chairman Jeff Shi thanked Lage for his service:
“Bruno is an excellent coach, a hardworking and dedicated manager, and a warm, wise and honest man," he said
“He and his staff have been a pleasure to work with throughout their time at Wolves, so it is with much sadness that we have had to make what has been a difficult decision.
“I honestly have no doubts about Bruno’s ability, and I’m sure he will succeed elsewhere, however the team’s form and performances over the last few months mean that we have no choice but to act.
“On behalf of everyone at Wolves, I would like to place on record our gratitude to Bruno and his coaching team for all their efforts during their time with the club, and wish them the very best for the future.”
The club also confirmed coaches Steve Davis and James Collins will prepare the team this week for the trip to Chelsea.