The decision to relieve the 55-year-old of his duties comes only five months after he replaced the sacked Steve Cottrell who the club's new owners did not fancy after they completed the purchase of the club at theend of last season.
"He can count himself unlucky to have lost his job with the team just one point away from the top six," Forest chairman Fawaz Al Hasawi said.
"With the January transfer window approaching, we feel it's the right time to make a change."
O'Driscoll leaves Forest with them in eighth place, having collected 36 points from 24 games. In total, Forest won nine league games during his time in charge, drawing nine and losing six.
"We have a responsibility to look to the future for this great club because we have huge ambitions for it," added Al Hasawi.
"We knew when we bought the club in the summer that it would take time for the players we bought in to settle but that process has taken longer than we anticipated.
"We feel we have developed a really strong squad of players but are still searching for consistency in terms of team performance, underlined by the fact that we have not won more than two games in succession in the Championship this season."
Sacking a manager on the eve of the transfer window is not the best idea when you give it some thought. Do the board make some decisions that a new boss will not be happy with, or do they make an instant decison on a replacement? Either way it is not an ideal situation, especially with games coming thick and fast. As they say - make a decision in haste and repent at your leisure a saying Mr Hasawi may not be familiar with.
The Forest fans have responded in amazement looking at the forums and given the strength of the Championship their current position is not a bad one. Neil Warnock will be glad Leeds' new owners haven't reacted in a similar fashion given that the Yorkshire club are below half way in the table.