The shock decision comes ahead of the final game of the League Two season, Colchester United at home on Saturday, with Pools already safe.
The club has confirmed Michael Nelson and Anthony Sweeney will take the team for the final game at the Suit Direct Stadium on Saturday.
A club statement outlined clearly the reasons behind Lee’s sacking: “Since losing to Rotherham United on 9th March, the team has won only one of 11 games, picking up just seven points and scoring eight goals.
“Additionally, previously strong home form has not been maintained with no home win since 15th February, resulting in just three points and only three goals in seven games during this period.”
Pools haven’t won at home on a Saturday since October.
And Pools owner and chairman Raj Singh has outlined his reasons – with the board ‘increasingly concerned’ with the form and results.
Singh said: “While we had some great results and occasions in cup competitions, unfortunately, our league performances have not been good enough with only seven wins since Graeme joined the club and as a board we have become increasingly concerned by the drop-off in form.
“This has not been an easy decision to make.
"Graeme is a really good person and he has given everything to the job. I would like to place on record my thanks to Graeme for his efforts and I wish him and his family well for the future.
“After achieving promotion back to the Football League last year, we remain ambitious as a club to continue our progress with promotion to League One being our target.”
He added: “We have a brilliant fan base and the crowds at the Suit Direct Stadium this season have been outstanding with an average of 5,200.
“We have put a lot of work into operating the club with a robust financial and commercial model to protect it long-term.
"This is now allowing us to bring back the academy and we will be making a number of other significant investments into infrastructure and people this summer.
“Further, after investing money into the team in January, we will continue to add more quality this summer window and beyond.
“The club has made real progress over recent years and I felt it important to make this decision now, so we can get our new manager in place as early as possible to prepare for the new season.”