Molnar, 52, was hired in December 2011 as Massachusetts moved its football program to NCAA Division I FBS status. The Minutemen went 1-11 in both of Molnar's seasons as coach.
"We want to thank Charley Molnar for his service and the extraordinary time and energy he devoted to coaching the Minutemen as we entered competition in the Football Bowl Subdivision," Massachusetts Athletic Director John McCutcheon said.
"It has become clear, however, that we must improve our performance in several areas and move in a new direction to ensure success in the FBS. Going forward, we must build a strong foundation to win on the field and stimulate enthusiasm and support for the program throughout the university community."
Massachusetts said Molnar had three years, worth about $836,000, remaining on his contract. The position at Massachusetts marked the first head coaching job for Molnar, who was on coaching staffs at 12 schools, most recently at Cincinnati and Notre Dame, since 1984.