The loss at Mennaye Field left Albion seven points adrift at the foot of the Championship table with three games to go.
Albion’s 13-year spell in English rugby’s second tier could end if they don’t beat Bristol in their next match on April 11.
Graham Dawe, who returned to Brickfields in January after the club’s failure to win one of their opening 10 league games, will take charge of the team for the remainder of the campaign.
Shanahan’s contract was due to expire at the end of April but it was ‘mutually’ agreed that he leave early.
Club chairman Peter Vosper said in a statement: “Our focus has to be on the future and with a home game coming up against Bristol the team will need as many fans cheering them on as possible.”
Shanahan tweeted: “Thanks to all the players and coaches over the last two seasons. Also thanks to the supportive supporters.”
The former Old Albanian and Cambridge coach took over at Albion in May 2013 from Nat Saumi.
However, his spell at Brickfields is likely to be remembered most for a club record 17 defeats in a row that lasted most of 2014.
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