Through 64 games, the Senators are 36-22-6, good for first place in the Northeast Division.
Ottawa's point total (78) is second best in the Eastern Conference, but the Senators have won only 11 of 26 games since Jan. 1.
They began the season with a five-game winning streak, but Paddock's firing follows consecutive shutout losses -- 5-0 at home against Toronto and 4-0 at Boston Tuesday.
His immediate replacement is General Manager Bryan Murray, who informed Paddock about his firing the day before Ottawa's next contest Thursday at Philadelphia.
"When you have to make hard calls like this, it's always emotional," Murray told reporters.
Murray, the head coach when Ottawa made its only Stanley Cup final in the 2006-07 season, has won 665 times in 1,300 regular-season and playoff games with Ottawa and Washington.