Following a board meeting which lasted over three hours, the directors decided it was in the clubs best interest to part ways with Perez.
Adored by the fans, Perez hasn't achieved the results desired after taking over for his fifth tenure as manager of the club from Diego Aguirre in September last year.
Despite leading the 2011-12 Apertura for the majority of the season, Penarol eventually finished in third place, with bitter rivals Nacional finishing in top-spot.
Peñarol are also without a win after two games in this years Copa Libertadores competition, the same competition in which Aguirre guided them to the final of last year.
Los Carboneros fell 1-0 to Godoy Cruz in Argentina before a humiliating 4-0 loss at home to Atletico Nacional last week.
Jorge Goncalves will take control of side as the club search for a replacement. His first game in charge will be this Wednesday against Bella Vista in the Primera Division.
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