"We did not meet our stated goals of qualifying for the playoffs this season and, despite playing with injuries to several key players, we have a culture of accountability and a responsibility of managing to positive outcomes," Leonsis said.
"I wish to thank Ernie for his service to the Washington Wizards. He and his family have been great leaders in our community and have worked tirelessly to make us a top NBA franchise."
Tommy Sheppard will become acting general manager, according to Mark Stein of the New York Times, and will report directly to Leonsis.
Grunfeld's tenure with the Wizards began in 2003. Over his time with the franchise the team went 568-724.
The Wizards made eight playoff appearances with Grunfeld as president and general manager.
They lost in the first round of the playoffs in four of those appearances, and lost in the conference semifinals the other four times.
Last season, they fell in the first round to the Toronto Raptors four games to two.
With four games left in the season, the Wizards are sitting in the 11th spot in the Eastern Conference with a mark of 32-46.