That loss left the Owls in the relegation zone after a run of nine matches without a victory.
Academy manager Sean McAuley has been appointed caretaker manager with responsibility for first-team affairs while assistant manager, Russ Wilcox, and development coach, John Dungworth, have followed Laws out of Hillsborough.
Laws and Wilcox had been in charge of the Yorkshire club since November 2006,when they quit Scunthorpe United.
Chairman Lee Strafford told the club's official website: "Brian Laws has done a very good job as manager of Sheffield Wednesday, particularly in light of the low level of resources at his disposal in the first two years of his time with the club.
"However, we believe that change at this point can deliver fresh energy and direction into first-team affairs in order to arrest our recent run of results and help push the club up the Championship table.
"A very positive legacy has been left by Brian in terms of the quality of the playing squad we now have at Sheffield Wednesday and we will now focus our attentions on securing the right manager to help these players push up the league in the short term and make us competitive for a return to the Premier League in the long term.
"Brian has put in an immense amount of work as manager at this club and he should be remembered for some genuine achievements on the pitch and for stabilising Sheffield Wednesday in the Championship.
"On behalf of the club I must thank him for his unwavering dedication in his role as manager and we wish him the very best of luck for the future."