Nolan was 75-68-21 over two seasons of coaching the Islanders but last season the team was among the bottom three in the NHL Eastern Conference. He had one year remaining on his contract.
Nolan cited "philosophical differences" with Islanders executives in the decision, adding "we've agreed it's a good time for me to move on." Islanders General Manager Garth Snow also mentioned "philosophical differences" in his statement from the team.
"Since last season and continuing into the summer, I have realized we do not share the same philosophies," Snow said of Nolan.
Nolan said he had "tremendous respect" for what the team is trying to do. Snow thanked Nolan and wished him the best.
Snow said a search for a coach would begin immediately.
"I have a list of several qualified candidates," he said. "After a thorough process, we will hire the very best coach to lead the Islanders on the ice."