The AFA executive committee unanimously agreed to part company with the 49-year-old after refusing to meet his demands over the retention of his entire South Africa 2010 team.
The 1986 World Cup winner's assistants, particularly Oscar Ruggeri, had been heavily criticised by federation president Julio Grondona following the quarter-final exit at the hands of Germany.
Grondona and Maradona held showdown talks on Monday and when the details of the talks were revealed to the AFA board, they decided not to renew Maradona's contract.
"The president of the Argentinian Football Association, Mr Julio Grondona, made the members of the executive committee aware of the conversation with Mr Diego Maradona, setting out the points which had come out from the meeting," an AFA statement read.
"The executive committee unanimously resolved not to renew the contract with Mr Diego Maradona as coach of the Argentina national football team.
"Maradona's requirements were very far from the FA's possibilities.
"For the match against Spain, scheduled for September 7th, we may already have the new coach."
Grondona added: "It is difficult to agree. The hardest difference to agree on was changing some of Diego's staff.
"Nobody has been sacked. A contract has not been extended because the conditions were not the suitable."