The west Cumbrian club's board of directors acted over an apparent rift between the veteran Australian and the Whitehaven players, according to chief executive Barry Richardson.
"Don was informed last night by the chairman that he would be stood down," Richardson said.
"There were issues in the relationship between the coaching staff and the players and we thought it was in the best interests of the club to act quickly to resolve those difficulties.
"In order to start signing players for next year, we felt we needed to start the process of advertising for a new coach now.
"We are really appreciative of all Don has done this year in enabling us to get promotion to the Championship, which was important in view of the changes to the structure of the competition."
Gailer, 56, took over from former player David Seeds last October and, after helping secure promotion with 11 wins from 17 matches, was offered a new 12-month contract.
That offer has now been withdrawn and Gailer has left with immediate effect.
An unhappy Gailer confirmed the news and said: "That is right, it's all been very poorly handled."
Richardson said Gailer's support staff would be in charge for Sunday's final game of the regular season against North Wales Crusaders and the play-offs.