The club's figurehead for the past 13 years has been sacked by the club, along with head of recruitment Keith Burt and club ambassador Frank Clark.
Arthur was appointed in 1999, having made the short move from Nottinghamshire County Cricket Club.
Clarke, a former European Cup winner, 69, has a strong association with the Reds, having spent four seasons there as a player before returning for three years as manager in 1993, when he succeeded his old boss Brian Clough, and, more recently, as chairman.
A source close to Clark said that the decision had come "out of the blue" and is sure to upset a large number of Forest fans. Arthur may not be as universally approved of by the fans but his departure none the less comes as a surprise half way through the transfer window.