Fans had hoped Diniz, 49, who also coaches Rio de Janeiro club Fluminense, would restore the thrilling "samba football" that made the five-time world champions famous.
But since taking the job in July, he had struggled to deliver, with Brazil currently in sixth place in South America's 2026 World Cup qualifiers, the last automatic qualifying spot from the continent.
The decision came a day after a Supreme Court judge ordered the reinstatement of the CBF's president, Ednaldo Rodrigues, who had been ousted by a lower-court ruling on December 7th that found irregularities in his 2022 election.
FIFA and the South American Football Confederation (CONMEBOL) had refused to accept Rodrigues' ouster, warning the CBF it could be barred from international competitions if there was external interference in its affairs.
Rodrigues, the first black president in CBF history, had been leading negotiations to sign Real Madrid boss Carlo Ancelotti as coach.
That bid fell apart on December 29th when Ancelotti extended his contract with the Spanish giants.
Diniz presided over just two wins in his six months coaching Brazil, and had racked up a humiliating three straight losses in World Cup qualifiers, including at home to arch-rivals Argentina in November.
Brazilian media reports suggested his successor could be Dorival Junior, the current coach of Sao Paulo.
Split role
Diniz was named to the Brazil job for one year when he took over from Ramon Menezes, coach of the under-20 team, who had replaced longtime boss Tite (2016-2022) on an interim basis after the Selecao's underwhelming quarter-final exit from the 2022 World Cup against Croatia.
A favourite with fans for the creative attacking play he installed at 2023 Copa Libertadores champions Fluminense, Diniz largely failed to replicate the feat with the national team, triggering criticism that splitting his time between the club and national team was too much.
His tenure started well enough, with a 5-1 drubbing of Bolivia, followed by a 1-0 win over Peru.
But a goalless draw at home against Venezuela heralded tougher times.
Brazil have since struggled with a series of injuries, including to star Neymar, who went off with a torn knee ligament in a 2-0 loss to Uruguay in October that is expected to sideline him for months.
That was followed by a 2-1 loss to Colombia, then the nail in Diniz's coffin: Brazil's first-ever home loss in a World Cup qualifier, to Lionel Messi's Argentina, in a rowdy Maracana stadium where fans booed the losing coach.
Brazil are scheduled to face Spain and England in friendlies in March.
